Intermodal transport process

Chapter 4

Intermodal transport process Chapter outline 4.1 Definition of process 4.2 Processes in intermodal transport 4.2.1 Subprocess 1: Negotiation and configuration 4.2.2 Subprocess 2: Transport 4.3 Intermodal freight transport as set of flows 4.3.1 Physical flow 4.3.2 Logical flow 4.3.3 Contractual flow 4.3.4 Capital flow 4.4 Depicting the performance of an intermodal freight transport service 4.5 Conceptual formulation for integration in intermodal transport 4.5.1 The concept of fitness

71 77

79 82 83 84 87 88 89

90

94 94

4.5.2 The concept of friction in intermodal freight transport services 104 4.5.3 Depicting fitness and friction 106 4.5.4 The conceptual framework 112 4.6 Cost of modal integration 114 4.6.1 Cost structure of the freight forwarder 117 4.6.2 Cost of the transport services (plus the cost of transshipment operations) 117 4.6.3 Cost of modal integration 118 4.6.4 Conclusion 120 4.7 Barriers and challenges to the production of intermodal transport 120 References 127 Further reading 129

4.1  Definition of process Process is a concept used in multiple situations and for different purposes, ­making any attempt at establishing a universal definition difficult. Nonetheless, a process can be understood as a set of interrelated, coordinated, and sequential tasks whose purpose is to produce a predetermined output(s) from a given input(s). This act of transformation consumes a certain amount of resources: manpower, equipment, and materials (Figs. 4.1 and 4.2). Other authors and organizations have put forth other definitions for process. For example, Davenport (1992) considered process as a structured, measured set of activities designed to produce a specific output for a particular customer or market and as a specific order of work activities across time and place, with Intermodal Freight Transportation. https://doi.org/10.1016/B978-0-12-814464-0.00005-0 © 2019 Elsevier Inc. All rights reserved.

71

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FIG. 4.1  Schematic and hierarchical organization of a process.

FIG. 4.2  Hierarchical structure of business processes.

a beginning, an end, and clearly identified business and outputs: a structure for action; and Riley (1999) referred to a process as being the logical organization of people, materials, energy, equipment and information into work activities designed to produce a required end result (product or service). Recently, the ISO 9001:2000 standard defined process as a set of interrelated activities that transform inputs into outputs. The basic unit of a process is the task. A task represents an individual and well-defined work carried out by a person, equipment, or set person-equipment, through which a set of inputs are converted into something different, called

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­ utputs. The inputs and outputs can be of any kind and nature (tangible or o ­intangible), such as technology, equipment, information, financial resources, etc. In order to reduce the complexity inherent in managing or coordinating a high number of isolated tasks, these may be hierarchically organized in several echelons (Fig. 4.1). In this way, a set of tasks that is engaged may form an activity, while a set of activities may form a subprocess. The set of subprocesses form the process. Both the number of units within each level and the number of levels itself depend on each specific case. More complex situations, with higher numbers of tasks, would entail the definition of more echelons and clusters within each echelon, than less complex ones. Accordingly, any process obviously exists for the sole purpose of satisfying a customer’s need; otherwise, it is useless and should be eliminated. The customer can be either internal (e.g., another process, department, etc.) or external to the company (e.g., another company). Moreover, a process is triggered by the presence of all the necessary inputs; therefore, its behavior is occasion dependent. A major problem facing process definition is precisely the identification of the process’s limits and the identification of the limits of each inferior hierarchical level. At one extreme, each task could be considered a process, but that would be a nonsense situation, since a process by definition entails a certain level of complexity and the existence of a number of interrelated tasks; at the other extreme, all tasks could be brought together under the umbrella of a single process, but that would lead to a situation of ill-management, especially in cases with a large number of tasks. Therefore, for each situation, it is necessary to identify a point of balance, where the number of processes and respective echelons is an appropriate reflection of the reality and is simultaneously manageable. The successive passage of output(s) of preceding tasks to input(s) in subsequent ones generates flows. These flows cross the entire process and represent all kinds of movements, such as products, information, capital, etc. Fig. 4.2 depicts the flows within a process downward to the task level. The same rationale is replicated at all levels: the inputs are processed (within the process, subprocesses, activities, or tasks) and converted into output(s), generating the flows. A process is the schematic representation of how a company’s product or service is actually produced, showing all parties involved, the relationships among them, and the resources consumed by and tasks allocated to each one. Therefore, the behavior and evolution of an organization can be assessed through the monitoring and evaluating of the performance of its processes. Two concepts have been developed to judge the performance of a process: effectiveness and efficiency. A process is effective when its output meets the customer’s needs perfectly. A process is efficient when it is effective at the lower possible cost, which means that frictions within and among parties involved are kept to a minimum. Here, the costs are not only the overall costs (the sum of all tasks’ costs) but also the costs at any given moment (the existence of peak periods

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demanding huge amounts of resources are often more difficult to deal with and manage than continuous demand periods). Frictions arise from either nonoptimized tasks, or a lack of synchronism or compatibility among parties, which increase the required amount of resources to accomplish the assigned tasks and, consequently, the costs. Flows also run smoother and faster in more efficient processes where fewer frictions or hindrances occur than in less efficient ones. Although positioning of tasks within a process is not random, but follows a certain sequence, there are always time windows for the beginning (and ending) of tasks. Accordingly, it is possible to define different designs for one and the same process. Recalling that a task consumes time and resources, different arrangements of tasks, even if they yield identical effectiveness, surely lead to different efficiency levels. So, the solution chosen should obviously be that which yields higher efficiency, in other words, the optimal one. Identifying the optimal process is, in many situations, a not very straightforward mission, if not to say an impossible one, due to the high number of tasks involved. As a result, methods and tools have been developed to provide assistance and guidance during the process design so that the most suitable combination can be attained. Of the various methods in existence, PERT—Program Evaluation and Review Technique has proved to be robust and easy to use. This method was developed in 1958 by the United States Navy Special Programs Department for the planning and construction of the POLARIS missiles, and is grounded on the mathematical theories of sets and graphs. The most significant breakthrough achieved with this method has been the representation of the process by a web (Fig. 4.3) where the knots represent the activities (or tasks) and the links represent the relationships among activities (or tasks). Thus, consumed resources and time are represented at the knots while the sequence is given by the links. This method offers various advantages for analyses of processes: ● ●

● ●

Identification of the critical path; Higher degree of confidence as to the determination of deadlines and ­resources needed; Easier process management; Higher capacity of synthesis—it is possible to effortlessly bring together and process huge amounts of information;

FIG. 4.3  Schematic representation of a process.

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●

●

Uncertainty analyses—it is possible to take into consideration the influence of uncertainty with regard to task duration and consumed resources as well as perform scenario evaluation; Ease of use and simple to understand—applying PERT to a real situation requires little effort and learning time.

Although all these advantages have contributed to the success of this method, the most important benefit is, without question, the identification of the critical path. The critical path is the series of tasks that determines the minimum time needed for the project. No matter how quickly the other tasks are completed, the project cannot be finished any sooner unless the tasks on the critical path can be carried out faster. Thus, any increase in execution time for any of these activities automatically leads to an increase in the time needed to complete the process. This concept will be discussed in more detail later in this chapter. The application of the PERT method is straightforward, as it is only necessary to know the following details beforehand: firstly, the activities involved in the process; secondly, the duration of each one; and thirdly, their sequence (or, in other words, which activity or activities precede and follow each activity). With knowledge of this information, the process can be easily represented. Normally, activities are represented along a time axis and their size is proportional to their time of execution, which increases readability. Fig. 4.4 applies the PERT method to the process presented in Fig. 4.3. The process has been drawn along a time axis; in this example, it takes 15 units of time to be accomplished. Execution time for the activities is shown in gray and the sequence is represented with the arrows (links). Activity 1 needs

FIG. 4.4  PERT representation of a process.

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three units of time to be accomplished, while Activity 5 only needs one unit of time. The boxes around Activities 4 and 5 represent the available time windows for the execution of those tasks. The sequence of activities is 1, 4, 5, and finally 6. Between the end of Activity 1 and the start of Activity 6, there is a time gap of eight units of time, which exceeds the time necessary to execute both Activities 4 and 5, which require three units of time. This allows for a certain amount of freedom regarding the starting time of each one. On the other hand, for the Activities 1, 2, 3, and 6, no time slacks are available. Due to their duration, these activities require minimum execution times to be imposed, with any delay (they cannot begin earlier because their execution depends on the preceding activity having ended) in the commencement of one of these activities resulting in an increase in the overall execution time. The path formed by these activities is the critical path. The overall amount of resources is easily calculated by producing the sum of the amounts required by all activities, while the amount required at a given time is represented by the sum of the resources consumed by the activities that are being executed at that time, which is easily determined by means of a visual inspection. Thus, assuming the resources are interchangeable among activities and Activity 2 consumes more resources than Activity 3, the beginning of both Activities 4 and 5 has an impact on the amount of resources needed at that particular moment, which would definitely impact management of the organization’s resources. As already mentioned, the most important information to be gained from a PERT analysis is the critical path, which, in this example, consists of Activities 1, 2, 3, and 6. The critical path outlines a process in terms of the critical activities, which are those with no time windows available. Accordingly, the minimum execution time for a process is determined by the execution time for the critical activities. Changing either the duration or the commencement time of any of the critical activities automatically leads to an increase in the process duration time. The critical activities thus have a direct influence on the execution time (and, consequently, on the performance) of the process. Naturally, all activities are important, otherwise there is no reason for them to exist, but there is a direct link between the execution time of a critical activity and the respective process. The identification of the critical activities is of paramount importance whenever systems for monitoring or improving process performance or quality are to be implemented. Improving noncritical activities yields marginal gains, because they do not have a direct influence on process execution time (which, in turn, is linked to the overall performance). However, improvements in critical activities have an immediate impact in terms of process execution time. Accordingly, implementation of said monitoring and improvement systems should focus, at least in an initial phase, on the critical activities. Otherwise, return on investment from these systems may not be guaranteed. To return to the example presented in Fig. 4.4, improving either Activity 4 or 5 would lead to marginal gains in the final process execution time, whereas investing efforts in Activity 1, 2, 3, or 6 would result in substantial improvements in the process execution time and, ultimately, performance.

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4.2  Processes in intermodal transport In an intermodal transport service, agents are meant to perform a sequence of complementary and compatible actions. The mechanism on which the production of intermodal transport is based contains every ingredient so that the theoretical concept of the process can be applied: firstly, there is a defined purpose: the conveyance of goods from a place to another; secondly, there are parties: the agents engaged in the transport activities; thirdly, there is a sequence of individual and identifiable tasks and activities; and fourthly, every task is quantifiable in terms of resources and time consumed. Applying those theoretical concepts to intermodal transport provides important insights into this type of transport solution. On the one hand, it sheds some light on the complex web of relationship within an intermodal transport chain, helping to clarify the position and role of each agent. On the other hand, it depicts the mechanisms and relationships involved in this transport solution, promoting identification of the various tasks, activities, and subprocesses, as well as the critical activities and, ultimately, the critical path. Intermodal transport is not a transport solution in and of itself, but rather a concept of transport in which multiple modes of transport are brought together to deliver a tailored transport solution that best fits a given scenario. So, it is more like an empty box that will be filled up with several blocks (the agents) in varying sizes (reflecting the quantity of resources of each agent used), so that the outcome best serves the clients’ purposes. The agent that embodies and fills that empty box is the Freight Integrator. Furthermore, in function of its own assets and know-how, on the one hand, and on its positioning within the market, on the other, an agent may deploy resources in different ways—processes—than others to produce the same output. Today, the survival of agents in the market depends very much on their competitiveness, which is directly linked to their processes. As a result, there is a trend toward specialization, with agents progressively adapting their processes to the specific demands and characteristics of the specific market segments they see as best aligned with their own capabilities. This does not mean that the processes completely differ from agent to agent. On the contrary, in most cases, the bulk of the tasks are similar, and only very specific ones are different, as they have been designed to meet specific demands. Those specific tasks make all the difference in the process being the key to the agent in question’s competitiveness edge. To sum up, one has witnessed growing adaptation of agent processes to the demands of the market segment in which they compete, which has led to the creation of a large number of highly specialized tasks and activities, which in turn has progressively increased the variety of tailored intermodal transport solutions available. Despite this variety, the respective processes are largely similar, sharing many identical tasks, activities, and subprocesses. The differences can be found in particular details and vary situation to situation. In this chapter, a general

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intermodal transport solution is presented, along with the common tasks, activities, and subprocesses. The purpose is to present the main architecture of this kind of transport solution. Since the specific tasks vary in accordance with the real case, they will be dealt in greater detail during the case study evaluation. Furthermore, many agents do not disclose information on many of their tasks, as they regard them as central to their own competitiveness. After presenting the intermodal transport process, the flows that occur along an intermodal transport chain will be detailed. The flows are the tangible result of production of the tasks. Each task uses as inputs the outputs of preceding tasks and, its outputs will provide the inputs for the following task. The successive passage and conversion of outputs into inputs results in the flows. Accordingly, the flows depend on the process architecture, which in turn depends on the actual situation. Once again, one should point out that it is not possible to detail all possible kinds of flows; instead, only those flows that most probably occur along the general process previously depicted are described. In the case study presentation, the flows will be analyzed in detail. An example of an intermodal transport solution is depicted in the following scheme (Fig. 4.5). This chain is similar to that presented in Fig. 2.1, but instead of three legs, due to space restrictions it only has two. However, no rigor is lost because the

Shipper

Freight integrator

Transport company

Leg 1

Terminal

Freight forwarder

Leg 2

Customs authorities Transport company

Receiver FIG. 4.5  Intermodal transport service.

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same activities are involved in chains with three or more legs, the difference being that they are repeated more often. The client in this chain is a Shipper that wants to send some goods to a Receiver. To this end, a Freight Integrator is hired, which in turn hires agents to provide those services for which it does not own resources. If the Freight Integrator owns no resources at all, then it has to hire all services from other agents; conversely, if it owns all the resources requires, it does not need to hire any agents. Regardless of the situation, for the sake of clarity, services are always considered to be conducted by independent parties. By keeping all parties separated, the flows are better presented and described. Fig. 4.6 depicts the usual subprocesses and activities that can be identified along an intermodal transport chain. It should be noted that the duration of activities does not represent actual execution time, but it is merely indicative. The actual duration of each one depends upon each real case situation. In a typical intermodal transport chain like the one presented in Fig. 4.5, it is possible to identify two main subprocesses, each one consisting of a number of activities: ● ●

Subprocess 1: Negotiation and configuration; Subprocess 2: Transport.

4.2.1  Subprocess 1: Negotiation and configuration This subprocess encompasses the administrative procedures conducive to both the establishment of a contract of transport between the Shipper (client) and the Freight Integrator, and the assemblage of the intermodal transport chain. So, in the course of this subprocess, agents are essentially engaged in negotiations in order to come to agreement on all details of the transport service. This takes place before any transport activity begins. Subprocess 1 is made up of three main activities: ● ● ●

Activity 1: Shipper & Freight Integrator; Activity 2: Freight Integrator & Agents; Activity 3: Freight Integrator & Shipper.

Any transport service begins with a need felt by a shipper (client) to move some type of goods between two different places. The shipper then approaches a freight integrator showing its interest in the latter’s services. Activity 1 corresponds precisely to this phase where the shipper reveals its intention of moving some products between specified locations. Simultaneously, the shipper provides a full characterization of the transport service and the goods, so that the fright integrator may define a suitable solution. The information transmitted about the transport service includes the places of origin and destination; and the respective deadlines for the pick-up and delivery. If more than one service is desired, the shipper also details the transport intervals. The information

Negotiation & configuration Activity 1

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Subprocess 1

Subprocess 2 Activity 1 Load

Shipper & freight

Activity 2

Leg 2

Transport Activity 2

Activity 3

Freight integrator

Unload Activity 4

Activity 3

Storage

Freight integrator

Activity 5

Leg 1

Customs’ clearance

Activity 1 Load Activity 2 Transport Activity 3 Unload

Time FIG. 4.6  General subprocesses and activities in an intermodal transport process.

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t­ransmitted about the goods commonly includes a description of their nature, and the quantity, volume, and weight to be transported in each service and overall (if more than one service is expected). Based on the information received, the freight integrator, in the course of Activity 2, works on defining a suitable transport solution. Knowing in detail both the operational and technological properties of each mode of transport, on the one hand, and the portfolio of services, performance levels, and quality (namely, reliability, trustiness, and safety standards) of the companies operating in the transport market, on the other, the freight integrator outlines a few viable architectures for the transport service (each one having either a different combination of modes of transport, or the same combination but used to different extents) and chooses one or more suitable companies for each position. The freight integrator may arrive at a situation with multiple scenarios. Naturally, if it owns some or all of the resources (vehicles, warehouses, etc.), then naturally the architecture will include those, thus reducing the range of solutions. This situation is likely to happen when the freight integrator is a so-called courier (such as FEDEX, DHL, or UPS), where it owns all resources. So, when the shipper contacts it, only one solution is ever supplied. After identifying the potential transport companies, the freight integrator may contact them to negotiate prices and conditions. However, in most cases, the transport companies publish their fares, so that task may be not necessary. Finally, the freight integrator may come up with several possible suitable solutions. If this is the case, it may contact the shipper and offer it the option of picking the final solution. This phase corresponds to Activity 3. If the shipper has no involvement whatsoever in the definition of the transport solution, the final decision falls naturally to the freight integrator, which chooses the solution based on his own judgment. The decision process tends to be nonrational because of the presence of subjective factors, namely, own preferences (some freight integrators may prefer a certain mode of transport over another one; or bad experiences in the past with some modes or companies); special relationships with some transport companies; first solution on the list, etc. One important trend in logistics is customization, with companies progressively abandoning mass production and engaging in the production of tailored products, which have a higher added-value that compensates for the higher production costs. This trend has also made itself felt in the transport market, with companies increasingly supplying tailored solutions. Thus, the final transport solution is the result of an iterative sequence of cooperative efforts between the freight integrator and the shipper. In successive steps, the freight integrator presents refined solutions, until a final and best-fit solution is obtained. During these iterations, the freight integrators may have to negotiate several times with the other agents. This is the reason for the interaction

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presented between Activities 2 and 3, in Fig. 4.6. Once the transport solution is determined and all intervening agents are contacted, the transport chain can be put into motion.

4.2.2  Subprocess 2: Transport This subprocess encompasses all administrative and operational procedures that are necessary to move the goods between the origin and the destination, in accordance with the conditions initially agreed. So, it is the subprocess that corresponds to the effective transport of the goods. The agents engaged in the transport operations are managed and coordinated by the freight integrator, which oversees the transport chain. Subprocess 2 encompasses the following Activities: ● ● ● ● ●

Activities 1 and 6: Loading; Activities 2 and 7: Transport; Activities 3 and 8: Unloading; Activity 4: Storage; Activity 5: Customs clearance.

If the chain had more legs, there would a repetition of the activities mentioned here. Each extra leg means four new activities corresponding to Activities 1, 2, 3, and 4. For each time goods have to be cleared, Activity 5 must be added once. So intermodal transport chains with three or more legs are simple extensions of chains with two legs. With the intermodal transport solution completely defined, the freight integrator informs the various agents of their roles and duties. Once the transport service begins, the freight integrator has to ensure and enforce that all agents properly conduct and perform the tasks initially assigned to them. If there is any deviation from the planning, it has to take the necessary steps to resolve the issue. Furthermore, if any unforeseen event takes place, this agent will intervene to re-establish what has been initially programmed. The transport service begins when the vehicle is loaded with the goods to be transported at the location of origin. This phase corresponds to Activity 1. The loading tasks are specifically chosen for a given situation, since they vary according to the type of vehicle, i.e., if it is a container, trailer, cistern trailer, wagon, ship, etc., and upon the type of goods, i.e., if they are in bulk, pallets, liquids, etc. With the goods totally loaded into (or onto) the vehicle, the transport company may notify the freight integrator of termination of Activity 1. Then the goods are conveyed to the terminal, which corresponds to Activity 2. After arrival of the goods at the terminal, Activity 3 starts with the unloading of the goods from within (or off) the vehicle. Once again, the precise tasks depend on the type of goods and vehicle involved. When this activity has ended, either the transport company or the terminal agent may send a message to the freight integrator. The unloaded cargo can then either be immediately moved to the next mode of transport—referred to as a cross

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docking operationa—moved into storage (Activity 4) either for subsequent further transport or for customs clearance reasons, which is the case presented herein. As the cargo is meant for (or proceeding from) elsewhere, customs clearance is required. Automatically cargo is retained (stored) until the due authorization to be obtained. It should be noted that terminals where cargo is cleared are specifically conceived for that purpose and properly authorized, meaning that not all terminals are suitable for such operations. Examples of suitable terminals include international airports and ports. Of course, cargo that is not meant for customs clearance can be stored at any terminal. By law, the agent to be contacted for clearance of the goods is the freight forwarder. This agent is contacted in advance by the freight integrator, so, it is aware of the arrival of the goods. In the operations for customs clearance—Activity 5—the customs office may require a physical verification of the goods to ensure that the declarations presented match with what is actually being transported. For this reason, goods remain within the terminal, which this is the reason why Activity 5 directly linked with Activity 4 (Fig.  4.6). The tasks that make up this Activity vary from case to case: different customs authorities have different procedures (some are paperless while others are not, some require certain documents while others require other documents, etc.). The freight integrator is notified by the freight forwarder of termination of this activity. The goods can then be moved forward. From this moment onwards, the activities involved in the transport service have already all been carried out, and now merely are repeated. Hence, the goods are loaded into (or onto) a vehicle, which corresponds to Activity 1. Once that activity has been carried out, either the terminal or the transport company will notify the freight integrator; and the transport journey begins, corresponding to Activity 2. Finally, the goods arrive at their destination, where they are unloaded from the vehicle, corresponding to Activity 3. Once that activity has terminated, the transport service ends. The transport company then notifies the freight integrator, which in turn notifies the shipper that the goods have arrived at their final destination. As a final note, one should emphasize that the subprocesses, activities, or tasks described here may not necessarily take place, or may take place in a different order in real case situations. This happens because there is an almost endless variety of situations and cases, which cannot be documented. The example presented herein represents, in view, a typical chain, where neither special demands nor cargo with specific characteristics are involved, which is the case in many situations.

4.3  Intermodal freight transport as set of flows Along an intermodal transport chain, there is continuous interaction among the agents, the intensity and frequency of which depends on the role each agent plays within the chain. These interactions give rise to the exchange and share a. Crossdocking operations take place when cargo is simply shifted between vehicles, with no storage taking place.

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of different kinds of goods, information, responsibilities, or capital, generating the flows. Flows can also be understood as the advancement of the outcomes of tasks along the process. As clarified here, the output of one activity becomes the input for the next activity. The successive passage and conversion of outputs into inputs generate flows. Just as different kinds of outputs are produced, so do different kinds of flows occur along the chain. In this sense, flows are like strings that link the tasks to each other and to the agents, promoting the cohesion of the transport chain. The main flows along an intermodal transport chain are the physical flow (Fig. 4.7), the logical flow (Fig. 4.7), the contractual flow (Fig. 4.8), and the capital flow (Fig.  4.8). The physical flow corresponds to the effective movement of the goods between the origin and the destination. The logical flow is the exchange of information among agents. The contractual flow refers to the share of liability for the goods between the agents throughout the transport service. Finally, the capital flow is made up of the payments for the services carried out by the agents or payments due because of legal obligations (such as customs clearance). As the flows result from the accomplishment of the tasks, they depend upon the configuration of the process of the intermodal transport solution under analysis. Consequently, there is a broad range of possible flows. The flows presented in the following chapters correspond to the example of intermodal transport chain and respective process described now (Figs.  4.7 and 4.8).

4.3.1  Physical flow The successive carriage of the goods between agents from the origin to the destination represents the physical flow. Fig. 4.7 depicts the physical flow of the intermodal transport chain considered herein. As this flow corresponds to the movement of the goods, it only exists in Subprocess 2. The goods located at a shipper’s facility are picked up by the transport ­company—Activity 1—and conveyed from this point to the terminal—Activity 2. Here, the terminal’s employees unload the goods from the vehicle—Activity 3—and either shift them immediately to another vehicle or store them for later carriage—Activity 4. In the example presented, the goods need to be cleared by the customs authorities. During the operations for custom’s clearance—Activity 5—the cargo remains physically within the terminal, so that the customs authorities could check it. For this reason, the flow is presented with a different pattern during this activity. Having cleared customs, the goods may continue their journey. They are loaded into (or onto) the vehicle—Activity 1—and carried by a transport company—Activity 2—to the final destination: a consignee’s facility. Upon arrival here, the goods are unloaded—Activity 3—and delivered to the consignee.

Subprocess 1

Activity 1

Physical flow

Subprocess 2

Activity 3 Activity 2

Activity 2 Activity 1

Activity 4 Activity 3

Activity 5

Activity 2 Activity 1

Activity 3

Shipper Freight integrator

Transport company Terminal company

Receiver

Logical flow Shipper

Freight integrator Transport company Terminal company Freight forwarder

Receiver

Time

FIG. 4.7  Physical and logical flows along an intermodal transport chain.

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Freight forwarder

Activity 1

Physical flow

Subprocess 2

Activity 3 Activity 2

Activity 2 Activity 1

Activity 4 Activity 3

Shipper Freight integrator

Transport company Terminal company Freight forwarder Receiver

Logical flow Shipper Freight integrator

Transport company Terminal company Freight forwarder

Receiver

Time

FIG. 4.8  Contractual and capital flows along an intermodal transport chain.

Activity 5

Activity 2 Activity 1

Activity 3

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Subprocess 1

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4.3.2  Logical flow The key to the success of an intermodal transport chain lies in the capacity of the agents to exchange important information in a rapid and accurate manner. A robust information system promotes transparency, enabling the early detection of deviations from previous planning, and facilitating the identification of possible faults or negligence on the part of the agents. This makes it possible to quickly adopt corrective actions to minimize any negative effects of the unforeseen changes; and helps to clearly determine liabilities, promoting trust among agents and offering incentives for agents to excel and improve themselves. This ultimately leads to a progressive improvement in the performance of the transport services. Furthermore, an adequate information system facilitates and renders more accurate the monitoring of performances of the tasks and agents’ performance, as well as making identification of the critical tasks and, consequently, the critical path easier. This knowledge is critical for an effective implementation of actions aimed at improving performance, as it identifies the weak links where improvement is necessary and also the key links that have a greater impact on the overall chain performance. Fig. 4.7 depicts the logical flow of the intermodal transport chain considered herein. The logical flow takes place in both subprocesses. In the course of Subprocess 1, there is an intensive exchange of information among all agents that leads to the design of the intermodal transport solution. The logical flow starts when the shipper approaches a freight integrator with the intention of engaging in negotiations for defining a transport solution for its goods. The shipper reveals what is to be transported and in which conditions— Activity 1. The freight integrator then—Activity 2—designs a few solutions and contacts various transport companies to negotiate prices and conditions. The latter contact may not be necessary if prices are already public (and there is no need for negotiation) or if the freight integrator is in a position to offer the transport services itself. If necessary, the freight integrator may contact the shipper to seek clarification on specific details or to jointly design the transport solution. After completion of the design, the freight integrator notifies all agents about their roles and obligations—Activity 3. This activity may be broken down into several stages, because some agents may only become involved at a later stage, which is the case for both the terminal and freight forwarder. Naturally, the timing is defined by the freight integrator and depends on the real-life case. With the transport solution perfectly established and all agents aware of their roles and duties, the physical flow may begin, marking the end of Subprocess 1 and the beginning of Subprocess 2. The transport company sends a message to the freight integrator informing it of termination of the loading operations—Activity 1, which precedes the carriage of the goods to the terminal. Here the goods are unloaded and, once again, at the end of this operation, notification is sent to the freight integrator. This message can be sent either by the transport company or by the terminal.

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The goods are now stored within the terminal, now in the clearance process. This operation is conducted by the freight forwarder, which, upon completion thereof, sends a message to the freight integrator informing it of that fact— Activity 5. Afterwards, the cargo is again loaded into (or onto) a vehicle— Activity 1. At the end of this operation, the transport company or the terminal sends a message to the freight integrator. Finally, the goods arrive at their final destination, where they are delivered to the consignee. When this occurs, the transport company informs the freight integrator of that fact; on the basis of that information, the freight integrator then notifies the shipper of completion of the transport service—Activity 3. The pattern just described is one of many possible configurations. All depends on the technology available and the requirements defined by the freight integrator. If there is real time tracking, then the flows are practically continuous between the various agents and the freight integrator. Moreover, the freight integrator may decide to notify the agents involved in Activities 1, 3, 4, and 5 as to the arrival of the cargo and give directives on how to act. Such a situation would generate a new and different configuration for the logical flow. So, all depends on the actual real-life case. However, regardless of the configuration of the logical flow, the freight integrator is the pivotal figure in the transport chain. All agents report directly and only to it, and depending on what was initially scheduled, it processes all new information and sends tailored and relevant messages to each agent. One can therefore say that this agent promotes the exchange of information among agents. A freight integrator has the job of coordinating and ensuring that all agents are rightly informed as to their roles and duties, and that the transport service adheres to the defined schedules.

4.3.3  Contractual flow During a transport service, goods are susceptible to damage or even destruction, as a result of mishandling, accidents, or deterioration caused by natural sources (such as exposure to the sun or rain), etc. Such damage can represent significant economic losses depending on the goods’ intrinsic value and the extent of the damage. This makes it necessary to define the appropriate mechanisms, so that—if such a situation occurs—the owner can be compensated for any losses. Such mechanisms are laid down in the contract between the owner of the goods, the shipper, and the agent in charge of the transport, the freight integrator. The contract also defines the latter’s liability. Although the precise details may vary from contract to contract, in most cases these contracts are now largely standardized, due to the action of international bodies that have been issuing diverse standard contracts for different types of transport services. Fig. 4.8 depicts the contractual flow of the intermodal transport chain considered herein. The contractual flow only occurs in Subprocess 2, because that is where there is a physical flow.

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In an intermodal transport chain, the ultimate responsibility for the goods lies with the freight integrator, because it is this agent that establishes a contract with the shipper (the goods’ owner). However, those who actually handle and transport the goods are other agents, namely, transport companies and terminals, which have to bear the liability in the event of damage or destruction. So, a contract is established between each of these agents and the freight integrator, where they assume full responsibility for the goods. It should be noted that this contract is not accessible for the client, for whom the freight integrator is the only liable party. From this it results that, during the transport service, the liable party is the freight integrator—Subprocess 2. However, it successively transfers its liability to whatever agent has the goods in a given moment during the service, either the transport company—Activities 1 to 3, or the terminal—Activities 4 and 5.

4.3.4  Capital flow Capital gain is the raison d’être of any economic activity. The very existence of enterprise is based upon the goal of profiting from the respective business activities. The transport sector is no exception and, naturally, agents only get involved in a transport service in exchange for some financial reward. Furthermore, customs clearance usually involves the payment of a number of fees and taxes (whenever goods are imported). Therefore, along an intermodal transport chain, there are money flows for the payment of services and, if need be, customs duties. The capital flows from the client to the service providers (freight integrator, transport company, terminal and freight forwarder) or the customs authorities. Therefore, in an intermodal transport chain, the capital flows from the client— the shipper or receiver—to the freight integrator. Afterwards, there is then a capital flow from the freight integrator to each agent. The capital corresponding to the customs duties usually flows from the client through the freight integrator, then through to the freight forwarder and on to the customs authorities. The pattern of the Capital Flow depends upon the contracts established, both between the client and the freight integrator, and between the freight integrator and every other agent. The contracts define the moments or periods of payment. Some contracts foresee that payment should be made before the transport service is actually terminated, while others establish a period for payment after completion of the service. Naturally, each situation results in a different pattern. The customs duties, on the other hand, are usually for immediate payment, as this is a requisite for customs clearance. Fig.  4.8 depicts the capital flow for the intermodal transport chain under analysis. It is assumed that payment takes place as soon as an agent fulfills his service and customs duties are paid immediately. Accordingly, there is a capital flow during Subprocess 2 or after the completion of the Process.

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Under this assumption, the first payment is made after completion of the first Activity 3, when the transport company delivers the goods at the terminal. The following payments are made upon completion of Activity 5, when the freight forwarder clears the goods at customs. Two payments are processed: one for the freight forwarder’s service, and the other for the customs duties. After customs clearance, the goods are loaded into (or onto) a vehicle. Activity 4 ends, and the terminal is paid for the services provided. Finally, when goods reach their final destination, the transport company receives its payment, as does the freight integrator for completion of the transport service.

4.4  Depicting the performance of an intermodal freight transport service The Oxford dictionary has several entries for the noun performance (Wehmeier, 2000), namely: ● ● ● ●

How well or badly something works, or someone does something; The act of performing a play concert or some other form of entertainment; The way a person performs in a play, concerts, etc.; The act or process of performing a task, an action, etc.

Thus, the noun performance denotes the skill of an entity in carrying out a certain task or process (if more than one task is involved). The entity is responsible for the work in question, and can be either an individual or a group.b Consequently, performance can be used as a means of forming a judgment of the entity’s capacity to carry out one or more tasks. Since performance is a noun, it does not convey in itself any value or attribute. Therefore, for a judgment to be possible, it is necessary to associate the term with another factor (an adjective, variable, or indicator). If an adjective is associated, then the performance is eminently qualitative (such as good, average, bad, satisfactory, poor, etc.). If a numerical factor is associated, then performance becomes quantitative. Performance is also an absolute concept, in the sense that it does not require comparison with any other entity for it to be determined. Thus, the performance value of an entity is always the same regardless of the environment and the properties of that environment. The assessment of the performance is therefore of paramount importance to the transport agents, since it enables them to understand how well they are doing their tasks. Naturally, the higher the performance level, the better they are at carrying out their tasks. If they surpass their competitors’ performance level, b. Such as a person, organization, or process. The performance of a process refers to how the group of individuals or organizations performs the tasks at hand. It may be of interest to evaluate the performance of the group, instead of each one individually.

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then they will be more competitive and, in principle, will be able to continue in the market. There is a vast body of literature indicating and suggesting performance variables and indicators for all types of agents, task, and processes in the domain of transport.c Let us now consider a multimodal transport made up of a set of independent and nonrelated single-modal transport services. This situation means that, from the point of view of each agent, all other agents do not matter, which in turn means that each one produces its own transport service regardless of the needs, characteristics, etc. of the others. Therefore, the overall performance would be the result of the simple summation of the various individual transport services’ performances. However, in an intermodal freight transport service, all agents work together toward a common goal: each one is aware of the other, and each transport service is coordinated and finetuned together with the other services by the freight forwarder. The freight forwarder organizes and manages the various agents, aiming to get the most out of each party to the benefit of the overall performance of the transport service. The role of freight forwarder thus ­generates synergiesd that add to the overall performance and reduce the waste that diminishes the overall performance. Accordingly, in intermodal transport services, the overall performance is more than the sum of each individual transport service’s performance. The following graphic (Fig.  4.9) represents the performance of a multimodal and an intermodal freight transport service. The vertical axis is the performance (measured in a specific unite). The figure takes into consideration a transport service with three dual systemsf: DS1, DS2, and DS3, and one freight forwarder (FF).g If this set of dual systems is involved in a multimodal transport service then, according to the foregoing assumption, the overall performance would be the summation of each dual system’s performance (bar on the left in Fig. 4.9). If the same dual systems are involved in an intermodal freight transport service,

c. As far as freight transport is concerned, please see Blauwens et al. (2006) for further reading. Some measures of performance were already indicated in D’Este’s (1996) conceptual representation of the intermodal freight transport service. d. Based on Ackoff’s (1994, pp. 181) definition of synergy as being “an increase in the value of the parts of a system that derives from their membership in the system, that is, from their interactions with other parts of the system. […] Put another way, synergy requires an increase in the variety of behaviour available to the parts of a system.” e. The unit depends on the specific case, but it could be time, reliability, flexibility, or capacity. f. Dual system is a set made up of the transport agent and the mode of transport. If the same transport agent operates more than one mode of transport, then it forms several dual systems (one for each different mode of transport). g. The performance of DS1 is represented in blue, DS2 in red, DS3 in green, and the FF in orange. The dashed bars represent losses in performance.

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FIG. 4.9  Depicting the performance of intermodal freight transport services.

then the overall performance will be higher due to the synergies created and the reduction of waste achieved by the freight forwarder. Let us now assume that, firstly, each dual system is deployed at maximal performance; secondly, that synergies are maximized; and thirdly, that waste (inefficiencies) is reduced to zero (or to a minimum). Such an assumption would constitute a situation where that set of dual systems would be delivering the maximum possible overall performance. Let us call this performance the theoretical performance (bar on the right in Fig. 4.9). The theoretical performance thus equals the maximum performance attainable by an intermodal freight transport service. However, a variety of real-world reasons may give rise to losses in synergies or to waste between the dual systems’ profiles and thus rule out achievement of the theoretical performance. These reasons include factors such as lack of schedule coordination, reduced physical interoperability, different procedures and cultural habits, or nonwillingness of transport agents to work together. These are factors that the freight forwarder cannot eliminate because they are internal to the dual system and are thus outside its scope of influence. Also, let us assume, for purposes of presentation, that these are internal frictions and they may correspond to either a decrease in synergies or an increase in waste. And that eventual external factors (such as congestion, bad weather conditions, etc.) have no impact on performance. This simplification does not affect the validity of the reasoning. The external factors would have an equal

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impact on the performance of the dual system regardless of whether they are operating in multimodal or in an intermodal freight transport services. Hence, the inclusion of external factors would lead to an offset (positive or negative) in all performances (bars) by the same amount. Accordingly, the maximum performance attainable in the real world would be inferior to the theoretical performance. Let us call this performance the best possible performance in the real world (second bar from the right in Fig. 4.9). There may thus be a gap between the theoretical performance and the best possible performance in the real world (Gap 1 in Fig. 4.9). This is the so-called Friction Gap, which corresponds to the amount of waste or, in other words, the level of friction between dual systems. The best possible performance in the real world is therefore the maximum performance attainable by a nonfit intermodal freight transport service. It should be noted that the Friction Gap affects in equal measure the multimodal transport service. Indeed, a similar figure to Fig. 2.11 could be constructed for the multimodal scenario. However, since the scope of this research work is intermodal transport chains, only that particular scenario is analyzed. The inclusion of multimodal transport services is for benchmarking purposes only. The friction gap cannot be eliminated by the freight forwarder because it is generated by characteristics that are intrinsic to the dual systems and, thus, outside its scope of influence. In order to reduce the friction gap, the dual systems must work together to eliminate the sources of friction.h Looking now at the freight forwarders, they are certainly not equally skilled. Indeed, different freight forwarders follow different processes of production of intermodal freight transport services and, accordingly, are likely to obtain different performances from one and the same set of dual systems. So, the actual performance achieved by a set of dual systems ultimately depends on the capabilities of the freight forwarder; this may be below the real world performance (if the freight forwarder is not able to manage the dual systems in the best possible way). Let us call the performance actually achieved by the intermodal freight transport service the actual performance. The actual performance should lie somewhere between the performance of a multimodal transport service and the best possible performance in the real world (second bar from the left in Fig. 4.9). On the one hand, the actual performance should be higher than the performance of a multimodal transport service because of the synergies created by the presence of the freight forwarder; on the other, it will at best be equal to the real world performance (because that performance is the maximum attainable by a transport chain). Moreover, reaping the maximum synergies and eliminating all waste could be quite a task for a freight forwarder. A second gap may thus occur between the real world performance and the actual performance. This is the so-called Freight Forwarder’s Gap (Gap 2 in

h. Such as investment in interoperable equipment, alignment of processes, etc.

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Fig. 4.9) and it corresponds to the inability of the freight forwarder to get the most out of the dual systems and, ultimately, the transport service. A third gap may also be identifiable between the actual performance and the performance of the multimodal transport service. This is the so-called Freight Forwarder’s Synergies Gap (Gap 3 in Fig. 4.9) and corresponds to the added valued brought in by the freight forwarder. A final gap can be identified, corresponding to the difference between the real world performance and the performance of the multimodal transport service. This is the so-called Intermodal Synergies Gap (Gap 4 in Fig. 4.9). It corresponds to the full potential of intermodality over multimodality (that may not be entirely exploited due to the incapacity of the freight forwarder). Based on this reasoning, we would argue that the performance of an intermodal freight transport service is a function of three factors, which are: ● ● ●

Performance of the dual system: transport agent—mode of transport; The freight forwarder’s management capabilities; The Friction gap.

The assemblage of high-performance dual systems does not necessarily mean that the outcome will be a high-performance intermodal freight transport service, due to the interplay of forces between the performance factors: either there may be a high degree of friction among the various parties (friction gap) resulting in low-performance transport chains; or because the freight forwarder may not be able to reap all the possible synergies from the resources or eliminate the waste (high freight forwarder’s gap). Herein lies a possible explanation of why some high-performance modes, when brought together, are not able to yield a high-performance intermodal transport chain. Accordingly, due to possible friction gaps, the utilization of high-performance dual systems does not necessarily result in the production of high-performance intermodal freight transport services. The existence of friction gaps reduces the best possible performance in the real world and may rule out the achievement of a high actual performance. In this sense, lower performance dual systems may achieve higher actual performance if they are fit (zero friction gap).

4.5  Conceptual formulation for integration in intermodal transport 4.5.1  The concept of fitness 4.5.4.1  A review of the concept of fitness Utilization of the term fitness is by no means new in scientific research. In the domain of evolutionary biology, Charles Darwini, in his seminal work on the i. Darwin, Charles (1859) “The Origin of Species by Means of Natural Selection, or The Preservation of Favoured Races in the Struggle for Life,” London (United Kingdom), John Murray.

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evolution of the species, used the term fitness and some derivatives thereof (fit, fitter, fittest) to express the level of matching between the individual properties of the individuals (of a given species) and the characteristics of the environment.j In his research, Darwin observed variations to varying degrees in the properties of individuals of a same species (Darwin, 2007). He also observed that, depending on the specific characteristic of the environment, some properties could provide the individuals with a competitive advantage in their permanent competition for survival and reproduction (Darwin, 2007). He went on to claim that those individuals whose properties were more aligned with, or a better fit for, the characteristics of their respective environment, would have higher rates of survivability, and thus higher rates of reproduction, than those whose properties were less adapted or less fit. Darwin designates this mechanism Natural Selection or Survival of the Fittest. Ariew and Lewontin (2004) provided a further explanation of the use of the term fitness in Darwin’s work. They argued that the “different individual members of a species […] fit into the environment to different degrees as a consequence of their variant natural properties, and those that made the best fit would survive and reproduce their kind better than those whose fit was poorer. The word fit (fittest, fitness) is a metaphorical extension of its everyday English meaning as the degree to which an object (the organism) matches a pattern that is pre-existent and independently determined (the environment).” Darwin’s concept of fitness incorporates some features of interest to this study. Firstly, fitness presupposes the existence of two entities (in the case of Darwin’s studies, these are the individuals and the environment)k (Rosenberg, 1983). Secondly, fitness has a continuous naturel (Fisher et al., 1995). Thirdly, fitness has a multidimensional nature, as the individuals and the environment are described in terms of their properties or characteristics (not limited to one single property of each one) (Ariew and Lewontin, 2004; Rosenberg, 1983). And, fourthly, fitness is a measure of the individuals’ (and by extension the s­ pecies’) j. Environment understood as the spatial-temporal context in which the species lives (Rosenberg, 1983, p. 458). This includes, e.g., the geographical properties of the land, the existence of other predators or competitive species, the weather conditions, etc. k. It is important to mention that discoveries in the reproductive mechanisms of species and in the field of genetics, after Darwin’s works, have brought new meanings to the concept of fitness (Cohen, 1985). Currently, one meaning of the term fitness is reproductive fitness, i.e., “the probability of survival of a genotype from egg to adult” (Ariew and Lewontin, 2004, p. 353). In this interpretation, the fundamental property of fitness is the individual, whereas for Darwinian fitness the emphasis is placed on the relationship between the individual and its environment. This interpretation means that fitness may either refer to the properties of a single entity or the nature of the relationship between two entities. Other nomenclatures have been proposed. For example: Matthen and Ariew (2002) use the terms vernacular fitness and predictive fitness to designate Darwinian fitness and predictive fitness, respectively. In this book, as will be explained later in this chapter, the authors follow the Darwinian interpretation of fitness. l. Whether referring to the level of matching between the properties of two entities—Darwinian fitness—or whether referring to the intrinsic properties of individuals—reproductive fitness.

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level of competitiveness, since the higher the fitness of an individual, the higher the probability of surviving and reproducing. The utilization of the concept of fitness has not, however, been limited to the field of the Natural Sciences. In recent years, Richards (2004) proposed the extension of the concept of fitness to the sphere of the arts, with a framework for evaluating the aesthetics of artworks. The author argued for the relative nature of the concept of fitness by advancing that “a property of an organism contributes to the fitness of that organism only relative to a functional context” (Richards, 2004, p. 265). He defined the functional context on two levels: an internal context that refers to how the properties of the individual interact among each other,m and an external context that refers to how the properties of the individual interact with the environment. Richard goes on to argue that “an artwork is good insofar as it is fit – functions well in a specified context, and a property is good insofar as it contributes to the overall fitness of the work. And like evolutionary fitness, aesthetic fitness is relative to an internal context – the correlation of parts, and an external context – those who experience and use the artwork” (Richards, 2004, p. 265). While it is not our intention in this book to comment on this argument, such an exercise does throw light on some additional interesting features. Firstly, Richards emphasizes the relational nature of fitness and the importance of the context to the level of fitness in writing that “there is no value independent of, or in isolation from these contexts!” (Richards, 2004, p. 269). This feature leads to a second conclusion, which is the absence of a unique and absolute value for the value of fitness, because it is a function of the specific context. And, thirdly, Richards acknowledges the multidimensionality of fitness, as any artwork exhibits multiple properties and can therefore be assessed from different perspectives – or dimensions of fitness. Finally, it should be pointed out that no analytical tool to measure the level of fitness is proposed (nor is a discussion on this matter made). Accordingly, Richards’ concept of fitness remains essentially conceptual and qualitative. In the field of the Social Sciences, the term fitness has likewise been in use for some time. In 1950, George Homansn published a work in which he analyzed the behavior of society and the “behaviour of men in group” (Homans, 2003, p. XIX). In his work, Homans concluded that there were several elements influencing the emergence and the stability (or not) of different types of social clusters, such as families and friends. One type of these elements corresponds to factors of integration between people. The author enumerated several factors of integration, including: activity, sentiment, interaction, and norm. The factors of integration have a dual nature: attraction or repulsion. In this context, integration can be understood as fitness between people. m. Darwin argues that a change in some properties of an individual would result in changes in other properties, since they are all correlated (Darwin, 2007, p. 67). n. Homans, George (1950) “The Human Group”, Routledge & Kegan Paul, London (United Kingdom).

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Parallel to this, developments in the field of social sciences led to the e­ mergence of a novel research approacho so-called systems thinking, which is a philosophy of research based on the General Systems Theory formalized in 1968 by von Bertalanfy (Von Bertalanffy, 1968). Systems thinkingp scholars defend that a full understanding of real-world complex systemsq can only be achieved taking a holistic approach (i.e., by studying the system as a whole and not looking merely into its constitutive elementsr). Systems thinking brought with it a new perspective for tackling and researching organizations and organizational problems, and the vision of regarding an organization as a complex open social system emerged (Ackoff, 1994). From the systems thinking perspective, an organization is the system and its internal divisions and units are the constitutive elements. These elements are interconnected and continuously influence each other. Accordingly, successfully understanding an organization (and its problems) can only be achieved by considering it as a whole (Nadler, 1993). This new vision provided new tools for other authors to apply the concept of fitness in a different approach than Homans had taken. In the following decades, authors such as Seiler (1967), Lorsch and Lawrence (1969, 1972) embraced the systems theory and developed theories and tools to apply the concept of fitness to organizations. These authors adopted a processs view of the organization. They considered an organization a process that converts a certain set of inputs into a set of outcomes, having the capacity to evolve over time by changing or improving the inputs through analysis of the outcomes. In other words, they added a feedback interaction to the process of organization. Fig.  4.10 presents a schematic view of a company. With systems thinking, the concept of fitness gained a holistic dimension, since it was now applied to the entire organization, and also a dynamic dimension, since it could evolve over time through the feedback loop. In 1975, Bowers and his colleagues (Bowers et  al., 1975), using concepts from social systems theory and medical science pathology, proposed a model of organizational development. In this context, they advanced the principle of congruence and the principle of predisposition. The principle of congruence was defined as follows: “for constructive organizational change

o. The author defines research approach as a body of theories, methods, techniques, and tools. p. A thorough review of the concept of systems thinking can be found in Richardson (1999). q. Ackoff (1994, p. 175) defines complex system as being a “whole consisting of two or more parts (1) each of which can affect the performance or properties of the whole, (2) none of which can have an independent effect on the whole, and (3) no subgroup of which can have an independent effect on the whole. In brief, then, a system is a whole that cannot be divided into independent parts or subgroups or parts.” The notion of complex system is further elaborated in Section 4.2. r. The point is that as a system is more than the sum of its parts, an understanding of every constitutive element is not enough to understand the whole system (because the properties related with the interaction of the various parts are lost when breaking down the system). s. Process is defined in detail in Section 2.2.

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Inputs

Transformation process

Outputs

Feedback FIG. 4.10  Basic representation of an organization. Source: Oliver Wyman (2003, p. 4).

to occur, there must exist an appropriate correspondence of the treatment (action, intervention) with the internal structural and functional conditions of the organisation for which change is intended. Since by definition these internal conditions pre-exist, this means that treatments must be selected, designed and varied to fit the properties of the organisation” (Bowers et al., 1975, p. 393). The principle of predisposition was defined as follows: “there are certain points in organisation space where change will enjoy its greatest likelihood of success; these points are, at least in terms of the change strategy, boundary points, and change starts at that boundary and works inwards” (Bowers et al., 1975, pp. 393–394). The authors identified four main points— determinants of behavior—in an organization, which are information, skills, values, and situations. Based on their first principle, they argued that purposeful evolution depended from an adequate match—fitness—between the internal structure and the actions. And based on the second, they reasoned that purposeful change was only required to intervene in some aspects of the organization (and not in all of them). These concepts will be used later in this chapter. In 1980, David Nadler and Michael Tushman, taking the work of Bowers and his colleagues further (Bowers et  al., 1975), published their “congruence model for organisation analysis” (Nadler and Tushman, 1980). The two authors used the concept of fitness to develop a model aimed at helping managers improve organizational performance (and, accordingly, market competitiveness) from within. The model is meant to be applied at the strategic level of an organization (although it can also be easily applied to lower decision-making levels). They use the term congruence, but acknowledged that it has similarities to the term fitness, as they defined congruence as “a measure of how well pairs of components fit together” (Nadler and Tushman, 1980, p. 45). The level of congruence is defined as “the degree to which the needs, demands, goals, objectives, and/or structures of one component are consistent with the needs, demands, goals, objectives, and/or structure of another component” (Nadler and Tushman, 1980, p. 45). The basic hypothesis was that “other things ­being equal, the greater the total degree of congruence or fitness between the

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Transformation process Informal organisation Inputs Environment Resources History

Outputs Formal organisational arrangements

Task

Organisation Group

Individual

Feedback influence FIG. 4.11  Nadler and Tushman’s congruence model. Source: Nadler and Tushman (1980, pp. 47)

­ arious components, the more effectivet will be the organisation” (Nadler and v Tushman, 1980, p. 45). The congruence model is presented in Fig. 4.11, and exhibits a high degree of similarity with the conceptual view of Fig. 4.10, as all of the components of the process view of the organization are included plus the feedback loop. Nadler and Tushmann (1980) considered four dimensions of fitness: ●

●

●

●

Task—relates to how tasks and internal processes fit into the overall strategy of an organization; Individuals—relates to the nature and characteristics of the members and employees of an organization; Formal organizational arrangements—relates to how the internal structure of an organization (such as divisions, working units, hierarchical structure) fit into the overall strategy of an organization; Informal organization—relates to the internal culture of an organization.

Nadler and Tsuhman’s congruence model has since been extended to analyze the fitness of alliances of organizations (Douma, 1997; Niederkofler, 1991). Accordingly, the number of types of fitness has increased from four to five. The fifth type is the fitness between the strategies of the organizations in question (in an alliance) (Fig. 4.12). In his doctoral thesis, Douma (1997) argued that “there is strategic fitness if the partners' strategies and objectives are mutually dependent and compatible, and the alliance is of strategic importance to the partners’ competitive t. The authors define effectiveness as “the degree to which actual organisation outputs at individual levels are similar to the expected outputs, as specified by strategy” (Nadler and Tushman, 1980, p. 45).

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Cultural fitness

Strategic fitness

Organisational fitness

Operational fitness

Alliance success

Human fitness FIG. 4.12  Douma’s congruence model.Source: Douma et al (2000).

p­ osition.” Douma identified five factors for defining the level of strategic ­fitness, which are: ● ● ●

● ●

Importance of the strategic alliance; Compatibility of strategies and objectives; Common vision in relation to the market and the consequences for their own company; Degree of mutual dependency of the partners; Amount of added value for the partners and buyers.

Also, in the sphere of Management, Porter (1996) applies the term fit in his work on business strategy. Heu argues that a company can obtain a competitive advantage through either a high operational effectiveness or an adequate strategic positioning. However, a competitive advantage largely based on operational effectiveness will have difficulty in proving to be sustainable because of imitators. The point being that a company’s activities can be emulated, to varying degrees, by other competitors, progressively leading to the erosion of its initial advantage. Conversely, a competitive advantage largely based on a strategic positioning will likely deliver a sustainable competitive advantage because it is difficult to emulate by other competitors. Three key principles sustain a company’s strategic positioning: firstly, the development of a strategy; secondly, the choice of a market positioning; and, thirdly, the creation of fit among the company’s activities. A company’s strategy is “the creation of a unique and valuable position, involving a different set of activities.” (Porter, 1996, p. 68). And, the essence of strategy lies in either to choose to perform the activities in a different way or to perform different activities than the other market competitors. u. This description is naturally a simplified and somewhat superficial interpretation of Porter’s work. The purpose is, however, not to discuss his ideas but to frame the context of usage of the term fit. Porter’s output is quite vast; for further reading, please see one of his well-known works: Porter (1996).

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Alongside its strategy, a company will also have to decide its market positioning. The various market segments tend to exhibit unique features (in terms of, e.g., marketing, quality, customer service, etc.), which naturally are likely to require unique sets of activities that are often incompatible with each other. Accordingly, the choice of market positioning involves trade-offs with the various market segments.v Finally, Porter adds that a company’s “competitive advantage comes from the way its activities fit and reinforce one another. Fit locks out imitators by creating a chain that is as strong as its strongest link. [Moreover,] fit drives both competitive advantage and sustainability” (Porter, 1996, p. 70). Porter argues that the fit is what ultimately makes a company’s strategic positioning unique because it cannot easily be emulated by competitors. Porter’s concept of fit is linked to the nature of activities (how they influence and determine each other) and to the processes (how the activities are coordinated and sequenced). It is achieved when the activities are coordinated and when they complement one another. Moreover, fit involves regarding a company as a system of interconnected activities (with all activities influencing all others) and not a simple collection of them. Thus, fit is fundamentally linked to the nature of the interactions between activities and not so much to the intrinsic nature of said activities. So, fit is related with the internal properties of the company that typically are not observable or known to outsiders. Finally, Porter identifies three levels of fit: consistency between activities; reinforcement between activities; and optimization of effort between activities. Each level denotes higher fit and “it enhances a position’s uniqueness and amplifies trade offs” (Porter, 1996, p. 71). In summary, the basic properties of Porter’s fit are fit refers to the relationship between activities, fit is dynamic and reinforced over time, and fit promotes competitive advantage. However, the explanation of the Porter system does have its shortcomings as he does not explain, firstly, how to achieve the fit between activities (he only explains the benefits accruing from fit) and, secondly, how to measure the fit of a company. This brief review on the evolution of the concept of fitness makes it possible to draw some conclusions. Firstly, the concept of fitness seems to refer to the degree of matching between a pair of entities. Secondly, fitness has an inherently dynamic behavior. Thirdly, while it is not a new development in the domain of Social Sciences, the concept of fitness has neither been explored nor extensively applied since the establishment of field. Fourthly, there seems to be a lack of v. A typical example is in the passenger air transport market between the networked airlines (e.g., TAP) and the so-called low-cost airlines (e.g., Ryanair). The market positioning of the networked airlines is different to that of the low-cost airlines. However, it is not rare for the networked airlines, when facing increased competition from the low-cost airlines, attempt to enter into their market segment (typically by lowering their fares). This is condemned to failure, as diverse real-world examples have demonstrated. There is a considerable amount of literature dedicated to this topic, such as, for example, Morrell (2005).

102  Intermodal freight transportation

metrics for measuring fitness. Although Nadler and Tushman (1980) state that fit can be measured, they fail to provide any means of measuring. Douma et al. (2000) have attempted to do so by performing a lexicographic visualization of fitness. This lack may be evidence of an impossibility to quantify and measure fitness or may simply reflect a lack of knowledge for the development of appropriate tools. As far as this book is concerned, the most relevant model was the congruence model of Nadler and Tushman (and later further developed by Douma). The main reasons for this are as follows. Firstly, the systems theory was the theory used to develop the congruence model. The field of intermodal transport also has the properties of a system and, therefore, the conditions that can be analyzed on the basis of this theory.w Accordingly, the congruence model can be applied to the study of intermodal transport. Secondly, the concept of fitness is multidimensional. There is no limit to either the quantity or the nature of factors to be taken into consideration in the analysis of fitness (Nadler and Tushman have identified four dimensions, while Douma has identified five dimensions). And, thirdly, the concept of fitness is dynamic in nature, involving memory and persistence over time; and it considers both internal and external factors (to the organization). All these properties are important in the freight transport market, as will be shown subsequently in this chapter. However, the concept of fitness and the congruence model exhibit certain insufficiencies that preclude their immediate application in the context of intermodal freight transport services. These limitations are detailed here. ●

●

●

●

The concept of fitness and the congruence model are applied at the strategic level of planning and controlx of either a single organization or alliances of organizations. The deployment of intermodal freight transport services is done at the tactical level. The concept and the model were developed for and applied in the field of management; however, in the case of intermodal transport, other areas may influence the fitness and the performance, such as technology, liability, or economic factors (which themselves bring with them constraints for the domain of management). Few metrics or methods have been offered to measure fitness, presenting certain limitations to its applicability. Additionally, we were unable to find any reference or application in the field of transport (so, there is no reference as to how to apply fitness to this field). There is no detailing in the theoretical aspects underlying the development of the concept of fitness and the congruence model. The aforementioned

w. Evidence that intermodal freight transport services present properties of systems is detailed in Section 4.2. x. There are three levels of decision: strategic, tactical, and operational.

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authors claim that the model was based on the systems theory; however, they fail to explain the mechanisms linking the concept of fit and an organization’s overall performance.y

4.5.4.2  Defining fitness The fitness is the maximum amount of performance that is possible to achieve with the integration of a set of dual systems. In the discussion about the performance of intermodal transport in Section 4.4, the best possible real-world performance was defined as the maximum performance attainable by a set of dual systems in an intermodal freight transport service. Moreover, the difference between this performance and the performance of a multimodal transport service was designated the intermodal synergies gap (Fig. 4.9). This gap represents the fitness, or in other words, the maximum increment in the performance of a multimodal freight transport service due to the integration of the dual systems. The gap between the best possible real-world performance and the theoretical performance was designated as the friction gap (Fig. 4.13). The friction gap corresponds to the lack of fitness or, as defined in the next chapter, to the level of friction. In graphical terms, the fitness is a concept that represents the degree of matching of the profilesz of two successive dual systems in a transport chain. The following figure presents the concept of fitness in a schematic way (Fig. 4.13). Chain A Modal profiles

MP1

MP2

Chain B MP1

MP3

Lack of fitness (friction)

FIG. 4.13  Concept of fitness.

y. It should be noted that this gap does not necessarily reflect the nonvalidity of the concept or the model but is simply evidence of the precision paradox. The precision paradox can be defined as the ability to “achieve precision in prediction without any knowledge of how the predicated outcome was produced” (Dubin, 1978, p. 23). Alternatively, the authors may simply have decided to disclose this information. z. The profile of a dual system (or of the freight forwarder) is the set of relevant characteristics that influence the performance of the intermodal freight transport service. The characteristics are described in Section 3.3, as part of the presentation of each dimension of fitness.

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Three profiles are represented: Profile 1 corresponding to MP1, Profile 2 corresponding to MP2, and Profile 3 corresponding to MP3. The configuration of each profile depends on the constituent variables. The profiles are combined in two chains: Chain A (left) and Chain B (right). When Profiles 1 and 2 are brought together, one can see that they do not match (gray region). The profiles are not compatible—this situation reflects the existence of friction that will be analyzed in the following chapter. On the other hand, Profiles 1 and 3 are a perfect match. They are thus completely compatible. Consequently, the (level of) fitness of Chain B is higher than the (level of) fitness of Chain A. Another way to look at the concept of fitness is through analysis of the flows along an intermodal freight transport service chain. One should bear in mind that, along an intermodal transport chain, four types of flows can be identified, which are physical flow, informational flow, liable flow, and financial flow. The fitness determines the ease or smoothness with those flows move between dual systems. The higher the fitness, the higher the smoothness of the flows. This means that, at the operational level, the fitness refers to how seamlessly the intermodal transport operations are produced.

4.5.2  The concept of friction in intermodal freight transport services The friction represents the waste or the inefficiencies that occur in the production of an intermodal transport service. Accordingly, the friction defines the limits to integration in an intermodal freight transport service. It is inherent to the dual system and it cannot be changed by the freight forwarder. In order to reduce the friction, changes in the dual systems (including the freight forwarder) are required, such as a change in technology, alignment of processes, and compatibilization of cultures. These changes may be made to the various dimensions of fitness.aa Recalling once more the discussion of the performance of an intermodal transport service in the Chapter 4.4, the friction corresponds to the friction gap, i.e., the difference between the theoretical performance and the best possible real-world performance. Thus, the friction of an intermodal freight transport service determines its fitness. The knowledge of the level of friction is arguably of greater interest than the level of fitness, as it provides information on the amount of operational performance that it is being lost and that could be recovered. Furthermore, knowledge about the less fit variables is fundamental for defining investment programs to improve performance. We have not found any definition in the literature for this kind of loss of performance. The solution has been to resort to the well-known physical concept of friction. There are various advantages in choosing this concept. Firstly, it is aa. The dimensions of fitness are analyzed in the following chapter.

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a well-known concept in physics, with a clearly defined behavior. Secondly, its behavior and mechanism are rather similar to those produced by the sources of loss of performance. Thirdly, it is sufficiently generic and broad to include under one umbrella all potential sources of loss of performance. In Nature, when an object moves or attempts to move on top of another object, as a consequence of external forces, there is a always an opposing force of resistance (Fig. 4.14). Because surfaces are not completely smooth, there are only a few points of contact between them—the peaks on the rough surfaces, so to speak. At these points, physical and chemical interactions occur: on the one hand, the peaks of one body block the motion of the others; on the other hand, chemical attraction between molecules also introduces resistance to the movement (Serway and Jewett, 2004). Such resistance force is known as force of friction or simply friction. Friction arises on the surface of contact and it has a direction that is contrary to motion. So, friction acts in such a way as to neutralize those external forces responsible for an object’s motion or attempt at motion. Therefore, if one needs to put an object in motion, either one increases the external force (to counterbalance friction), or one reduces the friction (e.g., by cleaning or polishing the surfaces). Hence, reducing the friction is an effective way of reducing the external force necessary to induce motion in an object. Transferring this concept to intermodal freight transport services, there are similarities between the physical concept of friction and the process of loss of performance. Firstly, in Nature, the friction occurs at the surface of contact between a pair of objects. The pair of objects corresponds to a pair of dual systems. The surface of contact can be regarded as the interactions between pairs of dual systems. Secondly, in Nature, friction results from the interactions between surfaces of a physical and a chemical nature. In a transport chain, the friction results from incompatibilities or issues between the variables of the dual systems' profiles. Thirdly, in Nature, there is more than one type of friction. In an intermodal transport chain, a similar phenomenon can be identified. The concept of fitness is dynamic and, hence, evolution in the type of friction over time between a pair of transport agents is to be expected. Fourthly, in Nature, friction counterbalances or reduces the force that attempts to move or keep the object in ­motion. In an intermodal freight transport service, the friction creates waste and inefficiencies.

f

Motion

Friction

FIG. 4.14  Mechanical representation of the concept of friction.

106  Intermodal freight transportation

In conclusion, there is a considerable degree of similarity between the c­ oncept of friction in Nature and the mechanisms responsible for the loss of performance in an intermodal transport chain.

4.5.3  Depicting fitness and friction 4.5.3.1  Types of fitness The inherent multidimensionality of the concept of fitness is laid down in its definition. The fitness was defined as the degree of matching of the profiles of two dual systems. Since the profile contains a set of relevant variables, one can conclude that there are multiple types of fitness. The question now is how to assess those types of fitness. In Chapter 4.3, intermodal transport was represented through a set of four types of flows, which are physical flow, logical flow, liability flow, and financial flow. Again, the notion of flows was used in Sections 4.1 and 4.2 to present the concepts of fitness and friction. It was considered that the greater the smoothness of the flows, the higher the fitness (and the lower the friction). Thus, using the flows as a basis for departure, one can conclude that there are at least four types of fitness, each one corresponding to a type of flow. However, we have found these four types to be insufficient. The reason is that the four flows only occur during the production of an intermodal freight transport service, which implicitly entails that the various transport agents willingly participate in such a transport solution. However, that may not necessarily be the case. Indeed, an important factor in the production of an intermodal freight transport service has to do with the commitment and predisposition of the transport agents to engage in intermodal transport operations with others. The point here is that transport agents that are direct competitors may be called to cooperate in an intermodal transport chain. Such a situation may give rise to some resistance to their participation,ab which can manifest itself at several levels: resistance to adapting procedures, resistance to overcoming cultural differences or resistance to solving liability issues. Although a severe degree of resistance may preclude the assemblage of an intermodal freight transport service, lower levels of resistance can still lead to the production of the service, but will inevitably introduce friction and, thus, losses of performance. For this reason, a fifth dimension of fitness was introduced to represent the nature of the relationship between transport agents, which we have called: strategic.

ab. This resistance is different from the transport agent's commitment towards intermodality. The resistance is determined by the relationship between a pair of transport agents. The commitment is determined by an agent's own strategy (regardless of the others). The commitment determines if the agent participates in intermodal freight transport services, whereas the resistance determines the nature of the business relationship between agents during the production of the intermodal freight transport service.

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Thus, five dimensions of fitness have now been identified (Fig. 4.15), which are physical, logical, liability, financial, and strategic. The first four flows correspond to the four flows in the process of production of an intermodal freight transport service. The fifth flow corresponds to the nature of the business relationships between transport agents. 4.5.3.1.1  Physical fitness As stated in the description of the process of an intermodal freight transport service in Section 2.2, the physical dimension of fitness refers to the physical flow. Physical friction relates to the waste and resistances that arise during the process of transfer (transshipment) of the freight. Thus, physical fitness is related to the physical interoperability of the modes of transport. Three factors were found to influence the physical fitness (Fig. 4.16). The first factor is related with the type of containerization of the goods. The transport of goods inside (or on) a container (or pallet) promotes the physical interoperability. This type refers to the compatibility of the containers in the interconnecting modes. The second factor has to do with the type of modes of transport. The level of interoperability differs between pairs of modes (e.g., the level of interoperability between a ship and truck is higher than between a ship and an aircraft). The third factor is related with the type of handling equipment. The utilization of nonadequate equipment for handling the goods or containers may introduce considerable friction in the transfer process. Physical fitness Strategic fitness

Dimensions of fitness

Financial fitness

Logical fitness

Liability fitness

FIG. 4.15  Dimensions of fitness.

Type of containerisation

Physical friction Modes of transport FIG. 4.16  Factors determining the physical friction.

Handling equipment

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The choice of the physical fitness has resulted, firstly, from the existence of a relevant stream of research in the area of intermodality concerning precisely the improvement of transshipment operations (Bontekoning and Priemus, 2004; Keller, 2004). 4.5.3.1.2  Logical fitness In accordance with the description of the process of an intermodal freight transport service presented herein, the logical dimension of fitness corresponds to the logical flow. Logical friction appears when there are difficulties in communication between the agents. Thus, logical fitness is related to the compatibility of the communication systems of the agents. Communication occurs at two levels: physical and virtual. Physical communication refers to the documents and paperwork that accompanies the goods from origin to destination. The physical channel is completely standardized today. There is specific legislation for each mode of transport that defines the documentation. In this sense, the logical friction could be something that is missing (e.g., something lost during transport, something not issued, incomplete information, etc.), an error of interpretation, an error in filling in the documents or, even, a deterioration of the documents (due to, e.g., bad weather or lack of care in handling). Since the documentation is required by law, any document missing may result in penalties (such as delays or monetary penalties at customs). The virtual communication refers to the information that is transmitted by automatic means. It has undergone major developments over the past decades, thanks to the advancement of the information and communication technologies and the continuous reduction in both technological and communicational costs. A key advantage of virtual communication is the visibility it brings to the production of the transport service. This visibility brings important benefits. Firstly, it allows the freight forwarder to track and trace the goods (i.e., to know the location of the goods), which allows earlier detection of delays or detours. If a delay can be invented at an early stage, the freight forwarder can intervene to minimize it. Additionally, it allows the shipper to know where its goods are, increasing confidence and trust in the transport service. Also, it can be helpful in the event of a dispute between transport agents. The logical friction depends on the communication channels between the agents. Examples of communication channels include telephone, fax, and email. The better the type of communication channel (in terms reliability or time of transfer), the lower the losses derived from either bad interpretation or a lack of information. Additionally, the communications network also acts to integrate the “formal and informal networks within the [freight] forwarder’s systems architecture” (Button and Stough, 2000, p. 298). The communications network promotes integration and cohesion among the employees of the companies involved, reducing the amount of problems when working together.

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Two situations should be considered when dealing with lack of (virtual) logical fitness. The first situation occurs when the agents use a certain type of communication equipment but they are not compatible with each other, rendering communication not viable. The rapid pace of technological development over recent decades has resulted in the generalization of technological devices. Agents have been progressively using technology to improve their performance (with success). However, the solutions are often not compatible with each other.ac A second situation refers to those cases where the agents have only basic communication equipment (such as telephone or fax). This may be the result of either a lack of investment capacity or because the agents do not see reasons for new investments.ad In any case, the outcome is the same: varying degrees of difficulties of communication between agents. The consequences of this are that the exchange of information becomes less efficient, takes more time and, often, requires human intervention. Identification of the logical fitness resulted essentially from the observation of the real world, although some literature also acknowledges this issue (e.g., Button and Stough, 2000). 4.5.3.1.3  Liability fitness According to the description of the process of an intermodal freight transport service, the liable dimension of fitness refers to the liability flow. Liable friction refers to problems arising from the liability transfer between agents. Liable fitness occurs when in the event of noncompliance, there are no liability issues and any indemnity that is due is paid. This dimension of fitness shows a latent behavior, since it only becomes active in case of a noncompliance of the transport service, like, for example, damage or destruction of the cargo or delay. Liability is well identified in the literature as being a key barrier to the production of intermodal freight transport services (Keller, 2004; Slack, 1996). One reason for this shortcoming has to do with the lack of an international convention regulating intermodal transport. For all legal purposes today, an intermodal transport is nothing more than a set of independent single modal transports. In this sense, payment of compensation depends on unequivocal definition of the liable party, something that is not always easy or even possible (Asariotis, 1999). The point is that each mode of transport is regulated by different regulations (and, in the case of international transport, by different conventions). Each convention provides for different rules and compensation amounts. ac. In the air transport sector, this problem has been overcome by the imposition (by IATA and ICAO) of protocols and standards of communication. However, the same has not yet followed in the other modes of transport. ad. Button and Stough (2000, pp. 302–303) present an interesting example of a Washington-based (United States) freight forwarder.

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4.5.3.1.4  Financial fitness In accordance with the description of the process of an intermodal freight transport service, the financial dimension of fitness refers to the financial flow. Financial friction occurs when payments are not made one time or in accordance with the contracts. Financial fitness occurs when all payments are made on time and in accordance with the contracts. The financial friction is related with either delays in the payments or incorrectness as to the amounts. Some interviewees pointed out, particularly in times of economic recession, that occasionally freight forwarders either allege financial difficulties so as not to respect the payment deadlines; or, alternatively, they only make partial payments to transport agents. 4.5.3.1.5  Strategic fitness The strategic dimension of fitness refers to the nature of the business relationship between the transport agents. One caveat is important here. An influential factor of the strategic fitness is the transport agent's strategy toward intermodality. If there is a strategic interest in intermodality, then actions at all decision levels of (strategic, tactical, and operational) will be taken to improve the business relations and the operations of the intermodal freight transport services. Conversely, if there is no strategic interest in intermodality, then most likely the transport agents will be reluctant to participate in intermodal freight transport services. Nevertheless, the strategic fitness is not defined by a transport agent's strategy toward intermodality. Instead, the strategic fitness is a function of the type of the business relationships between the transport agents. As already mentioned, in an intermodal freight transport service the transport agents are required to cooperate with each other. The nature of the cooperation defines the strategic fitness. However, these same agents compete on a daily basis in the freight transport market and, for this reason, they may not so be willing to cooperate. This resistance to cooperation defines the strategic friction. The strategic friction may be strong enough to dictate the failure of intermodal freight transport services. The strategic fitness is influenced by diverse factors located at the various decision levels. At the strategic level, it encompasses, e.g., the establishment and nature of commercial agreements, the alignment of processes or the investment in interoperable equipment. At the tactical level, it encompasses, e.g., the coordination of schedules or the agreement of prices. At the operational level, it includes, e.g., the nature of the relationships between the employeesae. As with the preceding type, this type of fitness also exhibits latent behavior because it only emerges in particular situations. ae. The production of an intermodal transport chain entails some sort of contact between the employees of the agents. Accordingly, the informal web of interactions plays an important role in the production of a transport service. The actual importance of this kind of network is visible in multiple circumstances. For example, in special situations (e.g., incomplete information, delays, or special requirements), the employees of one agent may refer to the employees of another.

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Finally, one should point out that the strategic dimension of fitness influences the other dimensions of fitness (e.g., a high commitment toward intermodality may lead transport agents to acquire interoperable equipment).

4.5.3.2  Tiers of friction The latent nature of the behavior of fitness, and thus friction, was revealed in the previous explanation. Specifically, the latent behavior refers to the fact that in certain situations some sources of friction can emerge; while in others, they remain nonactive, having no impact on the overall performance of the transport service. If not appropriately evaluated, such latency may lead to errors in the evaluation of the fitness, because an ostensibly fit intermodal freight transport service may turn out to be not fit, if the latent dimensions are not fit and have never surfaced. My research has shown the existence of three tiers of friction, which correspond to two levels of latent behavior. Fig.  4.17 presents the three tiers of friction along with the dimensions of fitness that are influenced. The three tiers of friction are: ●

●

●

Primary tier—encompasses the frictions that occur during the production of the transport service. It is the first type of friction to emerge. Secondary tier—includes two types: ● Type one—corresponds to the friction that reduces the ability to perceive a case of noncompliance during the production of the transport service; ● Type two—corresponds to the friction that reduces the ability to recover from a case of noncompliance. Even if the noncompliance is detected, the existence of barriers (frictions) may preclude any attempt at rectification. Tertiary tier—corresponds to barriers that emerge after the production of the transport service, but that prevent it from ending. Two types of friction were identified: ● Type one—corresponds to the financial friction; ● Type two—corresponds to the liability friction. It emerges in the event of noncompliance with the initial requirements and if the agents do not agree on how to solve the issue. Tier 1 primary

Tier 2 secondary

Tier 3 tertiary

Logical fitness Strategic fitness FIG. 4.17  Tiers of fitness.

Physical fitness Logical fitness Strategic fitness

Liable fitness Financial fitness Strategic fitness

112  Intermodal freight transportation

The primary tier of friction is a potential source of an incidence of n­ oncompliance in the production of an intermodal freight transport service. The secondary tier is a potential source for the occurrence of difficulties in the resolution of that incidence of noncompliance, either because it renders detection thereof difficult (Type One) or because it makes it difficult to devise a solution (Type Two). The tertiary tier may surface after completion of the physical transport, if one or more transport agents do not proceed with payments (Type One), or, in the event of a noncompliance, there is no agreement as to the liable agent (Type Two). Finally, both primary and secondary tiers occur during Subprocess 2 (Figure 4.6), while the tertiary tier may occur after completion of Subprocess 2. Table 4.1 presents the influence of the tiers of friction on the dimension of fitness. The table shows that some dimensions of fitness are only influenced by one tier of friction, whereas others are influenced by several. A given source of friction may exist and a given dimension of fitness may be present in more than one tier (such as the logical fitness).

4.5.4  The conceptual framework The conceptual framework is presented in Fig. 4.18. The framework provides an interpretation of the mechanisms of integration in an intermodal freight transport service. One possible way “to read” it is as follows: the requirements of the intermodal freight transport service (which are defined by the freight forwarder based on the demands of the shipper) influence the relevance of the variables of the profilesaf of the dual systems (and of the freight forwarder).

TABLE 4.1  Influence of dimension of friction on the dimensions of fitness Dimension of fitness

Tier of friction

Physical

Primary

Logical

Primary Secondary

Liable

Tertiary

Financial

Tertiary

Relational

Primary Secondary Tertiary

af. The profile of a dual system (or of the freight forwarder) is the set of relevant characteristics that influence the performance of the intermodal freight transport service.

Intermodal transport process  Chapter | 4  113 Tiers of friction

Primary

Dimensions of fitness Physical Logical

Secondary

Liable Financial

Tertiary

Relacional

Performance of the intermodal freight transport service

Requirements of the intermodal freight transport service

Profiles

FIG. 4.18  Conceptual framework.

Any ­eventual ­mismatch between the profiles, in one or more variables, will give rise to friction, in one or more tiers, resulting in friction, in one or more dimensions. Ultimately, the friction results in performance losses. The framework consists of five building blocks: 1. Building block one: “Requirements of the Intermodal Freight Transport Service”—determines the influence of the variables of the profiles (Chapter 4.5); 2. Building block two: “Profiles”—determines the level of fitness between the pairs of dual systems (Section 4.1); 3. Building block three: “Tiers of Friction”—determines the nature of the friction of the intermodal freight transport service (Section 4.1); 4. Building block four: “Dimensions of Fitness”—determines the nature of the fitness of the intermodal freight transport service (Section 4.1); 5. Building block five: “Performance of the Intermodal Transport Service”— defines the performance (Chapter 4.4). From Dubin’s (1978) reference framework, one concluded that there are four basic properties that define a theoretical model, namely, variables, laws of interaction, boundaries, and states. The basic properties of the conceptual framework are as follows. The variables are: ● ● ●

Requirements of the intermodal freight transport service; Variables of the profiles; Performance of the intermodal freight transport service. The basic laws of interaction are:

●

Integration of the intermodal freight transport service is determined by the minimum level of fitness between the profiles of the dual systems and the freight forwarder;

114  Intermodal freight transportation ●

●

●

● ●

●

There are five dimensions of fitness, which are physical, logical, liable, financial, and strategic; The dimensions of fitness define the variables of the dual systems' (and freight forwarders) profiles; The shipper's requirements influence the relevance of the profile variables and, ultimately, the level of fitness; Lack of fitness between the variables of the profiles gives rise to friction; Friction leads to losses in the production of the intermodal freight transport service; Friction may occur in different moments of the production and along one or more dimensions of fitness.

The boundaries, or scope, are the intermodal freight transport service. In particular, this conceptual framework is meant for one pair of dual systems (or for the pair: dual system and freight forwarder). Accordingly, the conceptual framework needs to be replicated for each pair of the intermodal freight transport service. Finally, as far as the state is concerned, two can be considered: ●

●

No friction between the profiles. This state represents the maximum level of fitness of the pair of dual systems (or between the dual system and the freight forwarder); Existence of friction between the profiles. In this state, the level of fitness of the pairs of dual systems (or between the dual systems and the freight forwarder) is not the maximum.

4.6  Cost of modal integration The costs of modal integration may be understood as the costs required to generate the synergies and added value inherent in an intermodal transport service. In other words, costs of integration are the costs required to turn a multimodal transport service into an intermodal transport service. By definition, the costs of modal integration are not present in the case of multimodal transport service, because there is no integration between the modes of transport (or, in other words, there is no freight forwarding role). Likewise, and for the obvious reasons, the costs of modal integration do not exist in cases of single modal transport services. In this sense, the costs of modal integration are the costs associated with the role of freight forwarding, namely, management and coordination of the transport service. Additionally, one can debate whether or not investments made by the transport agents for the production of betterag intermodal transport services should be considered integration costs. These investments can be, for example, the acquisition of intermodal transport units (e.g., containers); the acquisition of interoperable information systems; or the implementation of ag. Better understood as higher performance, which could be achieved through better physical ­interoperability, a better information system interoperability, the streamlining of processes, etc.

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new procedures. Although the investment will have to be recovered by the transport agents, how this will occur depends on several factors, such as the nature of the investment (financial architecture); the nature of the benefits accruing from the investment (only for the intermodal transport services, or also in other divisions of the company); the nature of the services provided by the transport agent (single modal, intermodal, storage, freight forwarding, etc.); or the structure of the market. Regardless of the specific case, we would argue that such costs may not be considered integration costs. Firstly, these costs are internal to the transport agent and they do not arise from the interaction between or integration of the transport agents. Secondly, agents do not need to incur these costs to produce an intermodal transport service; they only incur such costs to leverage the performance of the service. The following graphic (Fig. 4.19) provides a possible organizational structure of the costs involved in the transport sector. The costs are structured in function of who bears them, who causes them, and according to whether they are tradable or not. The cost structure encompasses the multiple cost areas in the transport sector.ah The costs of modal integration are included in the category Production Costs. The body of literature dedicated to production costs essentially adopts a modal perspective, and there is an almost complete lack of references to the costs associated with intermodality (Panayides, 2002). The European Union–funded research project RECORDIT (Black et  al., 2003) developed a detailed methodology for calculation of the total costs (internal and external) of ­intermodal

FIG. 4.19  Structure of transport costs. (Adapted from Quinet, E., Vickerman, R., 2005. Principles of Transport Economics. Edward Elgar Publishing Ltd., p. 121.)

ah. There is a vast body of literature dedicated to the study of costs in the transport sector. For further information on this area, please see Blauwens et al. (2006).

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freight transport. RECORDIT’s methodology largely follows the breakdown of costs as presented in Fig. 4.19 in order to assess the total costs of producing intermodal transport services. The methodology was then applied to three corridors or routes. Later, based on this methodology, Janic (2008) carried out a study to assess the potential effect of European policies on the competitiveness of intermodal and single-modal transport services. This author also uses RECORDIT’s methodology to assess the viability of long intermodal freight train services. As far as production costs are concerned, these services are essentially focused on the costs of each individual mode of transport. There is no consideration of the intrinsic costs for the freight forwarder or the eventual costs of modal integration. Ballis and Golias (2004) present another modeling framework for assessing the competitiveness of intermodal road-rail transport services versus road transport services. The authors divide the costs into terminal-related costs and transport-related costs. The former has to do with the transshipment operations, whereas the latter relate to the transport itself. Once again there is no reference to the integration of costs or the costs borne by the freight forwarder. Panayides (2002) acknowledges the limited literature on the “economic integration and coordination of the intermodal transport system.” Based on his study of the literature on the systems of governance of enterprises, he argues that the transaction cost approach may provide an adequate framework to discuss the economic organization of intermodal freight transport. He then goes on to present a conceptual discussion on application of the transaction cost approach. In conclusion, there is a limited amount of literature devoted specifically to the costs of supplying intermodal transport services. Of the works that do exist, most regard intermodal transport services as a simple collection of single-modal transport services plus a set of transshipment operations. Furthermore, understanding the integration costs is an area that is largely ignored in the literature. In this sense, the study by Panayides is noteworthy. However, the fact that he is the only author to advance a conceptual discussion coupled with the scarcity of references reveals a serious lack of knowledge on this matter. The costs of providing intermodal transport services arise from the consumption and utilization of an array of different resources, such as time, labor, materials, and equipment. The overall breakdown of the total expenditure into different categories of costs that an agent (typically the freight forwarder) incurs in the production of intermodal transport services defines its costs structure. Understanding a company’s cost structure is important for a number of reasons. Firstly, the cost structure identifies the costs of a transport service or transport route, which is the basis for the agent defining and implementing its pricing strategies. Secondly, the cost structure allows for analysis of cost trends and cost efficiency per item, department, or any other variable, which is important in helping the agent assess the evolution of its internal costs, or to spot deviations or overspendings. Finally, knowledge of the costs is a fundamental variable in an agent’s evaluation of new investments (e.g., equipment; launches

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in new markets; or acquisitions) (Quinet and Vickerman, 2005). Hence, knowledge of the cost structure is of paramount importance for an agent’s strategies, competitiveness and, ultimately, survivability.ai As already mentioned, this chapter aims to discuss the nature of the costs involved in the provision of intermodal transport services, with an emphasis on the costs of modal integration. The review of the literature has shown, firstly, that the literature is very limited with regard to this topic; and, secondly, the absence of an adequate framework for conducting any debate on the issue. In this sense, the following cost structure of a freight forwarder (supplying intermodal transport services), made up of three types of costs, can be considered: 1. Cost structure of the freight forwarder; 2. Cost of the transport services (plus the cost of transshipment operations); 3. Cost of modal integration.

4.6.1  Cost structure of the freight forwarder These costs correspond to the costs borne by the freight forwarder in carrying out its activity but which are not directly linked to the production of the intermodal transport service.aj These include costs such as equipment, building, commodities (e.g., electricity, water, etc.), insurances, labor (e.g., administration, lawyers, etc.) as well as other costs (e.g., cleaning, nontransport insurances, etc.). The cost structure is likely to differ between freight forwarders as the internal organization, management principles, human resources, or equipment are also different. Consequently, freight forwarders exhibiting different costs structures will likely incur different costs. The internal costs of the freight forwarder are a component in the total cost of production that has to be reflected in the price negotiated with the customer.

4.6.2  Cost of the transport services (plus the cost of transshipment operations) This type of costs refers to the price paid, by the freight forwarder, for the ­transport services. It includes, among other things, the transport legs (paid to each transport company), the transshipment operations (paid to each terminal

ai. Assessment of an agent’s cost structure is of particular importance in open and competitive m ­ arkets (i.e., where there are no regulatory barriers, such as barriers to market entry or price definition, and no form of governmental subsidization). In such markets, an agent’s survivability is dependent on their ability to generate enough revenues to cover their costs. Although many transport markets (particularly, air transport markets) remain controlled by national governments, in the European Union (and in some other regions, such the United States) the transport markets have been liberalized. aj. As a matter of fact, these costs could be incorporated into the freight forwarder’s cost structure. However, it was my intention to separate the transport-related costs from the nontransport-related costs.

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operator), and the clearance operations (paid to customs authorities and other servicing companies). As described in Section 3.2, during the assemblage of the intermodal transport chain, the freight forwarder negotiates in the market, with transport agents, the price and conditions of transport. In competitive markets, the price is the result of multiple forces, namely, the transport agent’s cost structure, the level of competitiveness in the market, the nature of the relationship with the freight forwarder, or the type of transport service. Once the negotiation process has been completed, the freight forwarder contracts each transport service (and transshipment operation) out to a transport agent. This type of cost is thus the price of the various single-modal transport services (the legs) and the transshipment operations paid by the freight forwarder.

4.6.3  Cost of modal integration This type of cost refers to the costs incurred in the course of ensuring—attaining and maintaining—the integrationak of the transport agents during the production of an intermodal transport service. While the freight forwarder is the agent responsible for ensuring the integration of the transport agents, the costs of modal integration are borne by all of them; because the role of integration requires actionsal from every transport agent, which inherently generates costs. In order to discuss the costs of modal integration, one needs firstly to understand the nature of integration of an intermodal transport service. Integration is achieved when the various transport agents (e.g., freight forwarder, transport companies, terminal operators, etc.) work in a coordinated and organized way in the production of the transport service. It is ensured by the agent performing the freight forwarding role, typically the freight forwarder. In this sense, integration is implemented through a set of contractual business transactions that are established between the freight forwarder and the various transport agents in the market. Completing a transaction is not done without costs, and such costs are defined as transaction costs. Thus, one may conclude that the costs of modal integration correspond to the transaction costs involved in the business transactions within an intermodal transport service. This view is also shared by Panayides (2002), although in a different context. This author applies the transaction cost approach to discuss the economic organization—governance system—of intermodal transport services. However, he does acknowledge that it could be a tool for understanding and determining the costs of intermodal integration.

ak. Integration of the transport chain is achieved when the transport agents work in a coordinated and organized way under the management of the freight forwarder (or agent performing the role of freight forwarding). al. These actions include replying to messages and requests, or responding to requests and reacting accordingly.

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Spulber (2003, p. 255) defines transaction costs as “the costs associated with completing a trade in the market place. Transaction costs are incurred by buyers and sellers in searching for each other, evaluating the goods to be exchanged, negotiating over the division of the surplus and keeping track of the details of the exchange, such as handling the payment and verifying the delivery of the goods.” A review of the concept of transaction costs lies outside the scope of the work presented herein. Suffice it to point out that the concept can be traced back to the seminal works of Coase (1960), which was later developed further by, among others, Williamson (1979, 1981). Hardt (2006) provides a thorough review of the concept, origins, and evolution. Based on the foregoing definition, one can naturally conclude that in a multimodal transport chain there are also transaction costs between the transport agents. However, these transaction costs do not have the purpose or effect of ensuring integration of the transport service, and thus have a different nature and value. As already mentioned, transaction costs arise in the course of a business transaction. Panayides (2002) depicts the business transaction and identifies three events responsible for transaction costs: firstly, the acquisition and processing of the information about the market place and its agents; secondly, the negotiation and design of the contract; and thirdly, the monitoring and enforcement of the contract. Transaction costs can thus be broken down into three categories of costs, which are information costs; negotiation costs; and monitoring costs. This classification provides a suitable framework for analysis of the costs of modal integration. Recalling the process of producing an intermodal transport service as presented in Section 3.2, both the information and the negotiation costs emerge in Subprocess 1 in Fig. 4.6. The former mainly refers to the costs incurred by the freight forwarder in scanning the market and identifying suitable transport companies. This process is based on the customer’s requirements. The transport companies also incur costs, as this process typically entails some sort of communication between the parties involved. The latter type of cost emerges during the effective negotiation of the terms of the transport contract between the freight forwarder and the transport agents. The negotiation is carried out for each leg of the intermodal transport service. The negotiation costs include costs such as communications, equipment, human resources, and contractual costs (e.g., involving lawyers). The costs of monitoring are incurred in Subprocess 2 in Fig.  4.6, during the physical transport of the goods. During the transport service, the freight forwarder engages in diverse activities aimed at ensuring adequate delivery of the goods. Although these activities are conducted by the freight forwarder, they encompass all the transport agents. These costs refer to the costs related with the monitoring of the transport service and the implementation of corrective actions in case of deviations from the initial schedule. To this end, one can use a wide range of technological solutions ranging from simple phone calls to real-time track and trace systems. These more or less continuous interactions consume resources and thus generate costs.

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The latter activity refers to the actions implemented by the freight forwarder aimed at correcting deviations from the initial schedule. Should some unforeseen event occur and affect the normal production of the transport service, the freight forwarder may intervene with a view to resolving the issue. This will require further interaction among the agents and thus generate costs. It should be emphasized that these costs do not refer to those costs incurred by each agent, which fall into one of the other two categories depending who bears them (freight forwarder or transport company). Instead, this type of costs relates exclusively to the costs incurred from the interaction among transport agents.

4.6.4 Conclusion This brief reflection reveals the complexity of the cost analysis in an intermodal transport service vis-à-vis a single transport service. The basic reason lies in the hierarchy of the transport agents involved in certain business relationships. As far as the costs are concerned, these occur both during the production of the transport service and during the interaction between the transport agents. These were analyzed from the perspective of the agent that controls the transport service: the freight forwarder. Three cost types were considered: one, those incurred by the freight forwarder in its nontransport-related activities; two, those corresponding to the price established with the other transport agents; and three, those incurred by the freight forwarder in its transport-­ related activities. Of interest is the fact that the price defined at one level—between the freight forwarder and the transport agent—is incorporated by the freight forwarder as a cost that naturally influences the price agreement at the other level, i.e., between the freight forwarder and the customer.

4.7  Barriers and challenges to the production of intermodal transport There are multiple obstacles and challenges to the production of competitive intermodal transport solutions. The sources of those barriers have to do with the very nature of intermodalism. An intermodal transport service makes use of at least two different modes of transport in an integrated manner. Integration implies some sort of alignment or coordination among the participating agents. The following chapter describes the various dimensions of intermodal transport, five in all: physical, information, contractual, financial, and cultural. Barriers and challenges to the production of intermodal transport services can emerge along every dimension. This chapter will provide an overview of the most common ones. The vertical separation of each mode of transport into distinct single modal transport systems results from the historical mode-specific approach followed by most governmental and nongovernmental organizations

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(UNECE, 2001). Governments have for a long period of time maintained (and some still ­maintain) tight control over their economic sectors. For many years, business and trade were subject to considerable restrictions at both the national and international levels, and the freight transport sector was no exception. Regulations were established for the different modes of transport (Slack, 2001). Intermodal competition was normally not accepted; and regulations were so strict and time consuming that there was really no reason for intermodal cooperation. Even international transport services, which normally involved two or more modes of transport (sea or air transport for the intercontinental leg plus road or rail for the continental one), were subject to such a myriad of regulations, particularly with respect to the customs clearance process (Slack, 2001), which, in practice, consisted of a set of singlemode transport services. The majority of transport agents were single-mode-based, as there were no convincing arguments to operate more than one mode of transport: no significant synergies could be obtained from joint operation of several modes. Over time, both modes of transport and transport agents have evolved in isolation, even though they worked side by side. The lack of interaction meant that independent developments, i.e., without taking other perspectives into consideration, became the norm, resulting in different freight transport solutions. The production of competitive intermodal transport chains thus involves the seamless operation of various single-modal transport systems. In addition to this, and bearing in mind that many transport agents operate one single mode only, it is most likely that more than one transport agent will participate in an intermodal transport service. The agents’ strategies or processes frequently do not match, thus making the management of the transport service more complex. Today, the freight transport sector is a complex jigsaw puzzle of regulations, technologies, agents, and processes—most of these segmented by mode of transport. This situation gives rise to diverse challenges and barriers to the production of competitive intermodal transport services, which have been identified and catalogued by diverse authors. In their work, Bontekoning et al. (2004) conducted a literature review identifying the most frequently researched problems concerning rail-road intermodal freight transport. They distinguish eight research categories: ●

●

●

Drayage—research focuses on the development of tools to study behavior of these operations for reducing costs; Rail haul—there is a vast body of research concerning intermodal rail transport, but the most commonly researched issue is related with the organization of this mode of transport; Transshipment—research is focused mainly on the development of new railrail transshipment techniques and the evaluation of methodologies to quantify the result of changes in intermodal freight terminal operations;

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●

●

●

●

Standardization—literature addressing this topic has been found to be ­limited. Existing work focuses on the development of new standard load units, rail cars, and truck trailer devices; Multiactor chain management and control—the subject matters researched include the coordination of multiple transport agents, the role of information and communication technology in that task, the role and market power of each player, and the lack of a legal framework for determining an intermodal carrier’s liability; Mode choice and pricing strategies—there is a vast body of literature in this area, with several topics still raising concern, namely, mode choice attributes, cost structure, and competitiveness; Intermodal transport policy and planning—research areas include understanding how and which public policies can promote intermodal transport; also there is concern around the formulation of policies so that their efficiency can be maximized. In terms of planning problems, research also looks at issues with the locations of terminals, development of freight villages, and regional development; Miscellaneous—this group includes a set of research issues, such as decision support tools for shippers, optimal routing, historical perspectives, definitions, and other economic studies.

Keller (2004) adopted the term separation for obstacles to the construction of both passenger and freight intermodal transport chains. He grouped these separations into seven main types: ●

●

●

●

●

●

●

Separation in time—many existing transport infrastructures were planned and built at different periods in time, with different perspectives and requirements, which are not always compatible; Spatial separation—often planning and spatial development impose constraints on the construction of terminals or infrastructures, resulting in suboptimal transport systems; Separation by companies—the optimum of an intermodal transport solution may result in suboptimal conditions for one or more single modal transport agent(s), which may not be acceptable; Commercial separation—differences in documentation and ticketing between modes of transport; Informational separation—problems arising from difficulties in exchanging information between transport agents and the clients; Legal separation—many legal frameworks are mode specific and do not foresee multimodal arrangements, which introduce a number of issues in cases of conflict; Institutional separation—concessions for operating transport networks and regulators are often based on one single mode, which creates a barrier to the construction and operation of multimodal transport networks.

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Slack has argued that eventual incompatibilities at the technological level have been resolved to a fair extent (Slack, 2001) and that, today, the most important barriers affecting intermodalism have to do with: ●

●

●

Liability—there is no liability regime for intermodal transport operations; instead only a set of single-mode liability regimes with different terms exists. This diversity unnecessarily complicates the production of this kind of transport service; Documentation—each mode of transport utilizes a specific set of documents, which, in the case of intermodal operations, adds complexity and costs; Intermodal intermediaries—the transport sector has undergone profound changes over the past few decades, alongside the opening of the markets, with new agents entering into the market and those already in it taking on new functions. This increased diversity and complexity has to some extent affected the transparency in the market, particularly with respect to the role of each player.

Regulatory issues—while, over the past few decades, there has been a trend toward deregulation and privatization, there are still important legal barriers that limit or prevent the full utilization of intermodal transport services, such as controls over rates, entry to the market and ownership; Zografos and Regan (2004) drew attention to a relatively recent but already quite significant issue in intermodal transport operations: security. In recent years, security of the transport systems has become an important issue. Firstly, there is the growing threat of terrorism, which may use the transport systems either as targets or as vehicles. Secondly, fraud and theft have developed in terms of sophistication, making the weakest links in the transport systems vulnerable. The emergence of security as an issue is a consequence of the development and widespread availability of the new technologies, making it possible for more people to come into contact with powerful systems in easier ways. Moreover, the new demands in relation to freight transport services (increase in speed, greater volumes transported, and on-time delivery), coupled with the increasing complexity of the transport chains (reflected in the increasing number of transport agents), have put the transport services at a higher risk, particularly those which have not implemented adequate electronic protection and other processes. This issue has much to do with the fact that security is time and resource consuming. Additionally, the increase in the number of agents also raises the possibility of there being one agent who will not act in good faith, while at the same time diminishing the notion of responsibility. Asariotis (1999) has argued that the absence of an intermodal (or multimodal) liability regime introduces uncertainty into the transport service and may result in unfair situations for clients, the consequence being an increase in costs and discouragement of trade. In an intermodal transport service, the liability lies with the mode of transport where the problem occurs (because there

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is no universal regime). Since the various modes of transport have different regimes, at the outset there is no certainty as to the total compensation a client is due. Moreover, liability also involves clear identification of the source of the problem. However, it is often the case that either the problem is identified at a late stage in the transport chain, or is the result of a cumulative process. These situations of lack of clarity do not facilitate attribution of liability to a certain transport agent. To sum up, the current piecemeal liability regime is susceptible to situations of a lack of certain and clarity, which only cause further friction in the transport service. Panayides (2002) has examined issues pertaining to the economics of intermodalism and the cost structure of intermodal transport services, arguing that both of these areas are still largely unknowns. This situation restricts the capacity to both identify cost inefficiencies along the transport chain and achieve an adequate and fair distribution of the revenues among the transport agents. An OECD report has highlighted the traditional single modal focus of governments, intragovernmental institutions, and NGOs (UNECE, 2001). This has led to the definition of a set of specific and closed single modal regulations. Increasing globalization and the emergence of new transport paradigms in recent years have emphasized the importance of intermodality. However, it remains that the current legal environment segments the market by mode of transport, which does not favor intermodal transport. The European Union–funded CO-ACT project studied the feasibility of intermodal air-rail transport services (Amsterdam Airport Schiphol, 2002). The main barriers were identified at the technological and organizational levels, and in terms of availability of infrastructure. As far as technology is concerned, one of the key problems was the lack of interoperability of loading units between trains and aircrafts; the fact that they do not always match results in suboptimal utilization. Secondly, the documentation needed for each mode of transport is different. Consequently, the production of an intermodal transport service requires a larger amount of documentation, to make sure the requirements for each mode of transport are met. Finally, the production of an intermodal transport service is dependent upon the existence of junctions between the various transport networks. Modal transfer is processed at these junctions. However, for certain arrangements, there is a lack of available or suitable transfer points. The CO-ACT project only identified four airports with suitable freight rail terminals on site, which limits the scope for the development of intermodal transport solutions. The research project TRILOG (European Commission, 1999) took a different approach and identified the main barriers on the supply and demand sides, which are: On the supply side: ●

Nonadequate infrastructure—limited extension of some transport networks (e.g., suitable rivers or channels for inland shipping), lack of infrastructure

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●

● ●

interoperability (e.g., track gauges differing between countries preventing the free circulation of trains, or bridge capacity that is not uniform across Europe), lack of terminals, and missing chain links; Lack of standardization of load units, information systems, and administrative procedures; Lack of competition in the railway sector; Lack of marketing and door-to-door service offers.

On the demand side, the main problem identified is “non-compliance of intermodal transport with service requirements.” This problem arises from the inherent complexity of this kind of transport because, firstly, it involves more than one mode of transport and, secondly, because it is unaccompanied. The project discovered that clients have little information about the actual possibilities of intermodality and perceive it as a not very reliable and rather inflexible transport solution. Accordingly, they are somewhat reluctant to abandon their usual transport solution. The European Commission (2003) advanced the need for the better organizational complexity of an intermodal transport service. The need to coordinate and synchronize a set of modes of transport and transport agents is, for the European Commission, one of the main challenges for the production of competitive transport solutions. The competitiveness of this kind of transport solution depends upon the ability to adequately coordinate and organize the set of individual single-modal transports, which calls for adequate communication channels so that every transport agent can be informed as to its role at any given moment. An intermodal transport service may involve several transport agents, which must work in perfect alignment so that losses can be minimized. However, each transport agent has their own strategies, technologies, processes, and past experiences, and these often do not match up with those of the others. Furthermore, many transport services are produced on an ad hoc basis, which means that transport agents that normally compete in the market may be called to participate in the same transport service. Naturally, there may be some resistance to sharing information. Information flow is of paramount importance to the success of any intermodal transport service. Cargo is always transported with a range of information (e.g., type of goods, quantity, owner, and origin and destination). The correct transfer of information would allow for a more rapid transfer of cargo between modes of transport. It is also of particular importance for customs clearance, where any error or lack of information can result in considerable delays and costs. Information also plays an important role in the management of the transport service. A convenient information flow provides visibility to the transport service, enabling the continuous tracking of the goods. This means that any deviation from the planning can be rapidly identified and mitigation measures can be applied.

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One of the major problems is that transport agents have been implementing proprietary information systems that are not able to communicate with ­others. So, when different transport agents with different information systems are brought together, exchange of information can become quite complex and generate losses of information. Moreover, many transport agents lack the financial resources to implement any information system and continue to use phone or fax for communication. Such situations prevent the use of any kind of automatic information transfer. Finally, there is a certain degree of inequality in terms of the power of each transport agent. There is the risk that the more powerful are able to take advantage of their position to get unfair rewards. Such situations inevitably lead to conflict situations, which, in turn, result in poor transport services. Agents that feel unfairly treated will not apply their full resources in the production of the transport service. To sum up, the main obstacles and challenges to the production of competitive intermodal transport service come from two sources: one being the dissimilarities between modes of transport; and the other having to do with the participation of two or more transport agents. Each of these sources produces its own set of barriers. The first source generates barriers such as lack of suitable junctions, lack of interoperability, or different liability regimes. The latter source results in a transport service with a higher level of organization and a more complex cost structure. Technological development over the past few decades has to a large extent resolved, or at least mitigated, many technology-related issues (Slack, 2001), of which the emergence of containerization is the most paradigmatic example. Moreover, both governments and the private sector have committed to either constructing new infrastructure or upgrading existing facilities, resulting in an increase of the overall quality and availability of transport infrastructures. In the European Union, for example, the 2001 White Paper addresses the need for “linking up the modes of transport” (European Commission, 2001) and proposes a set of initiatives for the various transport networks, such as investments in Trans-European Networks, liberalization of the railway market, harmonization of regulation, and research and development within the framework programs. Conversely, there have been few developments toward mitigation of other nontechnological barriers, such as the differences in the liability regimes (Asariotis, 1999) or the greater organizational complexity (European Commission, 2003; Slack, 2001; Panayides, 2002). Consequently, despite all the efforts over the past decades and the improvements meanwhile achieved, there are still important barriers and challenges to be overcome if competitive intermodal transport solutions are to be a reality. All the barriers derive from the involvement and interaction of different single modal transport systems and transport agents. Each mode of transport has specific challenges and limitations, which further complex the organization and management of this kind of transport.

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Further reading Bowen, M.G., 1992. Feedback thought in social science and systems theory, George P. Richardson Philadelphia: University of Pennsylvania Press, 1991. Syst. Dyn. Rev. 8 (1), 105–107. https:// doi.org/10.1002/sdr.4260080114.