The Asia Pacific Gateway and Corridor Initiative:
Toronto Workshop, June 17-18 2010
Extending the Gateways:
Logistic Zones in North American
Freight Distribution
Jean-Paul Rodrigue
Associate Professor, Dept. of Global Studies &
Geography, Hofstra University, New York, USA
What Drives Supply Chain Management?
World’s Major Gateway Systems and Hinterland
Structure, 2006
Inland concentration
Coastal gateways
39 Gateway Regions
90% of the World’s Freight Transport
Pearl River Delta: 16.7%
Coastal concentration
Landbridge connections
Coastal concentration
Low hinterland access
Extending the Gateways: Two Dimensions
Gateway / Port Regionalization (A)
•Satellite terminals and logistics zones.
•Maritime / land interface.
Inland Port (B-C)
•Corridor development.
•Regional load centers.
Gateway
A
B
C
On-dock and near dock
Logistics
Zone
Logistics
Zone
Logistics
Zone
A
Satellite terminal
Corridor
Logistics
Zone
B-C
The Complexities of Inland Logistics: The “Last
Mile” in Freight Distribution
Massification
Atomization
Frequency
Capacity
HINTERLAND
GLOBAL
Shipping Network
Corridor
REGIONAL LOCAL
Segment
Inland
Terminal
Gateway
Distribution
Center
On-dock and near dock
A
Satellite terminal
“Last Mile”
Logistics
Zone
Logistics
Zone
Logistics
Zone
Customer
Corridor
Logistics
Zone
B-C
Extending the Gateway Through Governance
Changes
Conventional Port Authority
• Planning and
management of port
area.
• Provision of
infrastructures.
• Planning framework.
• Enforcement of rules
and regulations.
• Cargo handling.
• Nautical services
(pilotage, towage,
dredging).
Expanded Port Authority
The North-American Container Port System and its
Multi-Port Gateway Regions
4
2
1
3
6
5
7
Multi-port gateway regions
1. San Pedro Bay
2. Northeastern Seaboard
3. Southwestern Seaboard
4. Puget Sound
5. Southern Florida
6. Gulf Coast
7. Pacific Mexican Coast
Something Strange Happened on the Way to the
Terminal…
Transportation
Freight Village
Terminals
Networks
Roads / lines
Rights of way
1
1
Outdoor
Storage
2
Port terminals
Rail terminals
Airports
Inventory at terminal
Storage
Energy
2
Warehousing
Distribution centers
Cross-docking
Inventory in transit
Containerization Growth Factors: Which
Opportunities are Left?
A
Derived / Organic
(A)
Economic and income growth.
Globalization (outsourcing and global sourcing).
Fragmentation of production and consumption.
Substitution (B)
Functional and geographical diffusion.
New niches (commodities and cold chain)
Capture of bulk and break-bulk markets.
Incidental (C)
Trade imbalances.
Repositioning of empty containers.
Induced (D)
Transshipment (hub, relay and interlining).
B
C
D
American Foreign Trade by Maritime Containers,
2008 (in TEUs): The Trade Fundamentals
Importers
Exporters
Whirlpool
JC Penney
Nike
Red Bull
Samsung
Jarden
General Electric
Ashley Furniture
Ikea
Heineken
Chiquita
Philips
LG Group
Lowe's
Costco Wholsale
Dole Food
Sears Holding
Home Depot
Target
Wal-Mart
Newport Chinternational
Sims Metal Management
CGB Enterprises
Denison
JC Horizon
ExxonMobil
Delong
BASF
Archer Daniels Midland
Cedarwood-Young
Meadwestvaco
Procter & Gamble
Potential Industries
Dupont
Dow Chemical
International Paper
Koch Industries
Cargill
Weyerhaeuser
America Chung Nam
0
200,000
400,000
600,000
800,000
0
200,000 400,000 600,000 800,000
Asymmetries between Import and Export
Containerized Logistics
Gateway
Inland
Terminal
Distribution Customer
Center
Many Customers (Importers)
•Function of population density.
•Geographical spread.
•Incites transloading.
•High priority.
Repositioning
Supplier
Few Suppliers (Exporters)
•Function of resource density.
•Geographical concentration.
•Lower priority.
•Depends on repositioning
opportunities.
Distribution Network Configurations for
Containerized Import Cargo
Type
Supply Chain
Gateway-based
Few mass market goods (economies of scale in distribution).
Few very specialized goods (economies of scale in
warehousing).
Little if any transformations.
Transloading.
Tiered-based
Mix of retail goods coming through a few gateways.
Some customization.
Large suppliers and large retailers (Big Box).
Transloading, Postponement and Cross-docking.
Regional distribution
centers
Complex set of goods coming from numerous suppliers (e.g.
automotive parts).
Regional variation of the nature and extent of demand.
Local distribution centers Time sensitive bulky cargo (e.g. perishables).
Low lead times.
City logistics.
Distribution based on RDCs
Distribution based on tiered system
Distribution based on two gateways
Distribution based on local DCs
Optimal Location and Throughput by Number of
Freight Distribution Centers
Functional Relations between Inland Terminals and
their Hinterland
Freight Region
Logistics Pole
FLOWS & INTEGRATION
Inland
Terminal
I
II
Logistics activities
Retailing and manufacturing
activities
III
Added Value Activities Performed at an Extended
Gateway
Activity
Functions
Consolidation /
Deconsolidation
Inventory management practices.
Cargo consolidated (or deconsolidated) into container loads
(paletization).
Attaining a batch size (group of containers) fitting a barge or a
train shipment.
Breaking down batches so that they can be picked up by trucks.
Transloading
Change in to load unit (Maritime / Domestic).
Consolidation, deconsolidation and transloading commonly
mixed.
Postponement
Opportunity to route freight according to last minute and last mile
considerations (dwell time).
Buffer within a supply chain.
Light transformations
Forms of product and package transformations (packaging,
labeling).
Customization to national, cultural or linguistic market
characteristics.
Inland Terminals as Foreign Trade Zones (FTZ)
Custom
Clearance
Done inland instead of at the gateway port.
Likely faster (less congestion).
Consignment can stay for an unlimited amount of time in the
FTZ.
Consignee gets further advance notice that shipment is ready.
Duties
Not paid until the consignment is released and moved out of
the FTZ (storage).
Deferred if goods moved to another FTZ.
If transformation is performed in the FTZ, the duty class may
change (Select the taxation regime).
Not paid for damaged, defective or obsolete goods.
Settlement
Vendors often not paid until consignments leave the facility for
delivery (Delay settlement).
Remove damaged or defective products from the settlement.
Savannah Logistics Cluster
North Point Real Estate
Savannah River
International Trade Park
Ikea
Target
TEC
Home
Depot
Crossroads
Industrial Park
Wal-Mart
NS Near Dock
Intermodal Terminal
Port Industrial Park
Container
Terminals
Raritan Center, New Jersey
Raritan Center
Heller Industrial Park
Port Raritan
BNSF Logistics Park, Chicago (Extended Gateway of
LA / LB)
Distribution Centers
BNSF Intermodal Yard
Maersk
Wal-Mart
California
Cartage
CenterPoint-KCS Intermodal Center, Kansas City
Phase 1
Phase 2
Phase 4
Phase 3
Columbus (15km)►
Rickenbacker Global Logistics Park, Columbus Ohio
Gateway Campus
North Campus
Rail Campus
Air Cargo Campus
Intermodal Campus
NS Intermodal Terminal
Million TEUs
Container Traffic at North American Ports, 19802009: This was supposed to be impossible…
Mexico
50
United States
Canada
40
30
20
10
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
30
Container Traffic Handled by North American Ports, 1990-2008 and
Projections up to 2015
Pacific Coast
25
Atlantic Coast
Gulf of Mexico
20
15
10
5
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Million TEUs
Then, this must be lunacy…
Share of the Northeast Asia – U.S. East Coast Route
by Option
100%
90%
3.0%
2.1%
11.3% 15.1%
2.0%
20.8%
80%
4.6%
1.5%
0.9%
1.8%
2.0%
2.0%
23.6% 33.8%
38.2% 40.1%
42.0% 43.0%
70%
60%
Suez Canal
Panama Canal
Intermodal
50%
40%
30%
85.7% 82.8%
77.2%
71.8%
64.6% 60.9%
58.1% 56.0% 55.0%
20%
10%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007
Transit Times from Shanghai and North American
Routing Options (in Days)
Prince Rupert
12
Vancouver
4
13
8
5
Seattle / Tacoma
Toronto
Oakland
13
5
Chicago
3
26 New York
Los Angeles
25 Norfolk
Atlanta
5
14
Dallas
5
Savannah/Charleston
25
28 Houston
8
19
Lazaro Cardenas
22 Panama
Lower aggregate demand.
The “curse” of economies of scale.
Response from West Coast ports.
Response from railways (East vs.
West).
New gateways (Canada: CN, Mexico:
KCS).
Response from terminal operators.
Response from Caribbean
transshipment hubs.
Costs (fuel prices and Panama Canal
toll rates).
Competition from Suez and the
Mediterranean.
Regionalization of production.
Extending the Gateways
1- Regional Division of Distribution
2- Functional, Managerial and Governance
Changes
3- Potential paradigm shifts