18 Multi-modalism

Global supply chain management

and international logistics

Multi-modalism is the operation of a door-to-door/warehouse-to-warehouse

service for the shipper and involves two or more forms of transport. The
merchandise is conveyed in the same unitized form for the entire transit. This
operation may also be described as inter-modalism.
A variety of forms of multi-modalism exists:

(a) Containerization – FCL/LCL/road/sea/rail.

(b) Land bridge via trailer/truck – road/sea/road.
(c) Land bridge via pallet/IATA container – road/sea/air/road.
(d) Trailer/truck – road/sea/road.
(e) Swapbody – road/rail/sea/road.

18.1 Factors in favour of multi-modalism

The international distribution network is becoming increasingly integrated,
with multi-modalism playing a major role. The traditional seaport-to-seaport
or airport-to-airport operation is no longer viable in today’s competitive
global market. The international entrepreneur, for example, designs a product
in country A, assembles it in country B and sources its component units from
countries C, D and E. It is an extensive IT-driven logistics operation that com-
bines the activities of carriers, suppliers/manufacturers and the consignor and
consignee. Its efficiency directly bears on its scale and market penetration. It
is capital intensive, with a high level of utilization that helps fund the capital
expenditure necessary. It is a global operation, subject to no time barriers or
trade barriers that might impair its development. The more extensive the
global multi-modal network, the greater the acceleration of world trade
growth. Multi-modal facilities offer low-cost global distribution which,
coupled with fast transit in dedicated services, brings markets closer together
and bridges the gap between rich and poor nations. It particularly aids poorer
nations to compete in world markets by having a low-cost labour force
responsive to technical training and which therefore produces added value to
the indigenous commodities they produce. The total product concept is being
applied to global transport.
396 Multi-modalism: supply chain, logistics
The key to the operation of multi-modalism is the non-vessel operating
carrier (NVOC) or non-vessel operating common carrier (NVOCC). This
vessel allows a container (FCL or LCL) movement or trailer transit. Carriers
issue bills of lading for the carriage of goods on ships they neither own nor
operate. The carrier is usually a freight forwarder issuing a ‘house’ bill of
lading for a container or trailer movement, or, if the trailer movement is in
the UK/Continental trade, a CMR consignment note. For example, a freight
forwarder offers a groupage service using a nominated shipping line and
infrastructure. The freight forwarder offers his own tariff for the service but
buys from the shipping line at a box rate. NVOCC allows shipping companies
to concentrate on ship management and the freight forwarder to use his exper-
tise in marketing and cargo consolidation. This type of operation is particularly
evident in the Far East, US, African and European trades. Good facilities enable
effective operation.
All forms of multi-modalism involve a dedicated service, usually under non-
vessel operating common carrier (NVOCC) or non-vessel operating carrier
(NVOC) arrangements.
These factors outline why shippers favour multi-modalism:

(a) The service is reliable, frequent and competitively priced. Goods arrive
within a scheduled programme involving various transport modes and
carriers operating in different countries.
(b) In many companies it features as a global network either as a supply or
retail chain. The former may comprise an assembly/process plant serving
a local market whilst the latter involves the retailer buying the product in
an overseas market. The retailer may be a shop, manufacturer, consumer,
etc.
(c) Many companies operate their global schedules on the ‘just in time’ basis,
requiring dedicated and integrated schedules within the shipper’s ware-
houses and distribution arrangements. Multi-modalism is ideal for this
system. Many companies regard it as a distribution arm of their business.
IT strongly encourages multi-modalism as a global distribution system.
(d) The service is tailor-made for the trade/commodities it serves with its high-
tech purpose-built equipment. This service provides adequate protection
to the goods and arrival of the product in an excellent condition. The
product may be refrigerated, fragile cargo or high-tech electrical goods.
(e) It has a high profile which is a good marketing ploy in the promotion of
a company’s business.
(f) Companies are looking for offshore manufacturing and sourcing outlets
for their components and bulk cargo needs. Countries with an established
multi-modal global network are especially well placed in such a selection
process.
(g) The documentation requirements are minimal with the combined trans-
port bill of lading involving one through rate and a common code of
conditions.
 Rationale for development of multi-modalism 397
(h) More companies are focusing on international distribution as an important
element of their international business. Such companies identify two profit
centres: the manufacture/supply of the product, and the channel of
distribution from the supply point to the overseas destination.
(i) Companies using the multi-modal network as a supply chain are sensitive
to transit times and their capital tied up in transit. Quicker transit times
bring closer together the sourcing and assembly plants situated in different
countries, thus reducing the amount of capital tied up in transport, which
in turn reduces the company’s requirements for working capital, a critical
factor with the multinational enterprise.
(j) A key factor is the level of facilities provided by the NVOCC at the
terminal warehouse. Many have purpose-built sorting facilities for
specialist cargoes, as found in Distriparks and Districentres. The ports of
Singapore, Rotterdam and Dubai are leaders in the trading port concept,
offering Districentres, Distriparks and, in Rotterdam, European Distribu-
tion Centres are linked to a range of multi-modal outlets.

18.2 Rationale for the development of multi-modalism

Multi-modalism is closely aligned to containerization. It is a transit system
extending beyond the port-to-port journey to land transport and facilities.
Multi-modalism involves the integration of all transport modes requiring co-
ordination of all carriers to provide a dedicated through-transit service.
Maritime containers feature strongly in multi-modal operations. Shippers
look to the carrier to provide the optimum route for their buyers at a competitive
tariff and acceptable through-transit time. Emphasis is placed on technology,
finance, market development, quality control, cargo tracking, paperless trading
information systems, simplified documentation and a common code of carrier’s
liability.
Factors in the development of multi-modalism are these:
(a) Air/rail/sea/canal/ports operators are work closely together to remain
competitive and to facilitate trade development. Examples include the
sea/air bridge from Singapore and Dubai and the sea/rail land bridge in
North America.
(b) Governments are taking more interest in the development of their nation’s
economies by encouraging a global trade strategy and providing the
facilities to realise this objective. China is expanding its trade and has
seven seaports among the leading 20 ports handling containers. India is
also following this strategy, as is the UAE port in becoming the hub port
of the Gulf region.
(c) The development of Distriparks, Districentres and free trade zones
continues to grow.
(d) The documentation involving the carrier’s liability and code of practice
relative to multi-modalism is observed through the auspices of the
International Chamber of Commerce and other international bodies.
398 Multi-modalism: supply chain, logistics
(e) World markets are rapidly changing and the Far East is the fastest growing
market. Facilities are continuously being improved at Singapore in an
established industrial zone. Many companies use multi-modalism in their
global distribution systems.
(f) Containerization technology continues to improve. The market is shifting
from being product-driven to being consumer-led; the shipper is now the
dominant factor in container design and development. GE SeaCo are
market leaders in designing innovative containers to meet shippers’ needs
in a fast-changing logistically driven market. Examples are the general
purpose container range – (a) pallet wide 20 × 2.4 × 8 ft 6 in.; (b) high
cube pallet wide 20 × 2.4 × 9 ft 6 in.; (c) pallet wide 40 × 2.4 × 8 ft 6 in.;
(d) high cube pallet wide 40 × 2.4 × 9 ft 6 in.; (e) high cube pallet wide
4.5 × 2.4 × 9 ft 6 in.; and (f) bulk pallet wide high cube pallet wide 20 ×
2.4 × 9 ft 6 in. The high cube container fleet now totals 350,000 TEU,
mostly in the transPacific and Caribbean trade, a high cube container being
ideal for high cube and low weight ratio products. Palletization is popular
as a cargo unit distributor and GE SeaCo has developed the Sea Cell
container, whose use favours multi-modalism.
(g) Most mega container operators have customized logistics departments to
advise their clients on providing the most cost-efficient method of
distribution and optimal routes.
(h) The enlargement of the EU has resulted in a harmonized customs union
which is a single market with no trade barriers to the entrepreneur. The
EU favours a multinational transport network. The same obtains in the
North American Free Trade Area (NAFTA), covering Canada, Mexico
and the United States. Such trading areas, to favour multi-modalism,
remove international boundaries as impediments to market-driven distribu-
tion centres operating the ‘hub and spoke’ system.
(i) Fast-moving consumer goods markets, such as those for foodstuffs and
consumer products require sophisticated distribution networks. These
involve efficient logistics operations, as found in the ‘hub and spoke’
system. Good logistics speed transit times, reduce inventory costs in terms
of stock, provide a service to the consumer and mean quicker movement
through the supply chain to the consumer. Cost-effectiveness is the key
stimulant for multi-modalism.
(j) EDI and IT have revolutionized distribution logistics. It knows no
international boundaries or time zones and provides ultimate control over
performance monitoring of the goods. It can route and segregate cargoes.
Technology will have a major role in the continuing expansion of the multi-
modal network. It is a major facilitator of world trade development.

18.3 Features of multi-modalism

Analysis of multi-modalism reveals that the objectives of the discriminating
shipowner seeking to move unitized cargo are: to attain a high level of
 Features of multi-modalism 399
utilization of shipboard capacity; and to get a good return on capital employed
to produce adequate profit. This profit can fund tonnage replacement featuring
the latest technology. Formulation and execution of the multi-modal service
requires all involved to work well with management. The main features of
multi-modalism are these:

(a) It thrives on EDI and IT in a global network linking the shipper (exporter/
importer) and carrier at all stages of the transit.
(b) It provides a dedicated service, each operator/carrier committed to the
schedule.
(c) It operates under NVOCC or NVOC arrangements.
(d) It develops and co-ordinates the best features of the individual transport
modes to the advantage of the shipper.
(e) There is good utilization of multi-modal facilities which permits com-
petitive door-to-door/warehouse-to-warehouse through-rates to be offered,
thus exploiting economies of scale and yielding a favourable return on
investment in transport.
(f) It encourages shippers to pre-book shipments’ cubic capacity months in
advance. This aids good planning and the tracking down availability of
multi-modal resources. IT allows continuous dialogue between the shipper
and carrier.
(g) An increasing number of operators provide logistics departments custom-
ized to clients’ needs. This customization encourages closer co-operation
between the shipper and operator, and ensures commitment to the market
by user and provider of the multi-modal network.
(h) Good utilization of the structures encourages investment by the carrier
and the shipper (exporter/importer). It generates a spirit of partnership and
mutual understanding between the shipper and carrier.
(i) Multi-modalism is market-led. It brings buyer and seller closer and
enables international business to flow unimpeded in a spirit of under-
standing and common ideals. The multi-modal system is an extension of
the factory supply chain and features in manufacturers’ plans for their
international businesses. Continuous monitoring raises levels of efficiency
and further exploits the levels of competitiveness, with advantages for
exporter and importer. Monitoring occurs for packaging, transit times,
documentation, stowage, EDI, IT and transport capacity utilization.
(j) Multi-modal services are competitive because they offer through-rates
door to door/warehouse to warehouse. This process enables the shipper
to monitor his international distribution costs and compare alternative
route options on a value added basis. The container operator’s function
is to offer a complete package of services suited to the individual needs
of customers. These services include storage of goods in bonded and free
warehouses, stock administration, order processing, assembly, modifica-
tion, packing, national and international distribution and customs
documents.
400 Multi-modalism: supply chain, logistics
(k) The International Chamber of Commerce and other international bodies
permit a common code of liability and processing of documents. This has
generated the confidence in which multi-modalism operates. Examples
include the combined transport bill of lading, Incoterms 2010 – FCA, CPT,
CIP, DDU, DDP – and ICC UCP No. 600, covering payment by
documentary credits.
(l) Multi-modalism has generated a new climate in global international
distribution. The market is at the centre of its operations so that a closer
partnership obtains between the carrier and shipper. One area of especial
concern is to maintain schedules and further improve them to reduce the
time capital/goods are in transit and to speed up the distribution network.
These moves will improve added value and provide greater profit and
better service to the importer. This last point pertains to foodstuff
and goods of a high-tech, low weight ratio. Today the shipper looks contin-
uously to improve and develop/penetrate new markets; carriers are
responding positively.
(m) Multi-modalism is giving new impetus to the development of seaports and
airports. Port authorities worldwide are developing port enclaves through
Districentres and free trade zones. They are also initiating and encouraging
the port operators on whom they rely to develop and improve existing
multi-modal networks and port facilities. Examples of such developments
may be found in the ports of Singapore, Dubai, Klang and Rotterdam. Port
authorities are co-ordinating activities and developing strategies on an
unprecedented scale, particularly with regard to transhipment cargo and
sea/air markets. Shipowners are commissioning larger container vessels
in response to the growth of the one-stop port operation; they operate the
hub and spoke system to improve overall transit time and gain increased
efficiency. Table 18.1 provides examples of sea/air operations.
(n) Associated with (m) is the changing pattern of international distribution.
It is less port to port and more multi-modalism, relieving port congestion
and enabling development of ICD/dry ports, free trade zones and local
import and export control customs arrangements. The creation of a new
vision and enthusiasm at all levels in the supply chain, to develop and
improve value added benefit, has motivated the exporter and importer
using the network system.
(o) Market research is essential to any improvement. This requires continuous
marketing of the network, including commodity specification, variation
in tonnage flow relative to origin and destination, transit time, etc.
(p) Multi-modalism favours both large and small shipper operations as well
as the full load or consolidated consignment.
(q) Multi-modalism develops new markets, improves product/commodity
quality, raises loadability, reduces transit times, reduces packing and aids
the growth of high-tech fast-moving consumer markets. It brings cultures
and the international business world closer together in their objectives
and ideology.
 Multi-modalism strategy 401
Table 18.1 Transit times (days)

Tran- Overall
ship- transit
Trade routes Seaport Markets Sea ment Air time
Japan–Europe Singapore 8 2 1 11
South Korea–Europe Singapore 9 2 1 12
Taiwan–Europe Singapore UK 5 2 1 8
Hong Kong–Europe Singapore France 4 2 1 7
Korea–Europe Dubai Belgium 17 2 1 20
Taiwan–Europe Dubai Italy 15 2 1 18
Hong Kong–Europe Dubai Germany 12 2 1 15
Singapore–Europe Dubai Switzerland 10 2 1 13
Mumbai–Europe Dubai Spain 7 2 1 10
Chennai–Europe Dubai 9 2 1 12
Karachi–Europe Dubai 7 2 1 10

There is no doubt that multi-modalism contributes to the changing pattern of

international trade. It opens up countries with low labour costs to the
industrialized Westernized markets of great buying power. Such industrialized
high labour cost countries are increasingly reliant for the development of their
global manufacturing business on production in low-cost markets and then
employing multi-modalism to distribute their goods cost-effectively to high
GDP markets. The shipper/manufacturer/supplier/exporter/importer has a new
perspective on international distribution by formulating high-profile logistics
departments responsible for global distribution operations. Multi-modalism is
generating a globalized market place.

18.4 Multi-modalism strategy

The strategy to adopt with regard to multi-modalism is essentially market led
and high-tech. Market growth provides the cash flow to fund the continuing
investment. As the system develops, economies of scale reduce development
costs, as experienced when IT was introduced. Qualified experienced personnel
with complete commitment and a clear vision of the market’s needs help assure
multi-modalism’s future.
Matters requiring special attention are these:

(a) Shippers and operators must study trading patterns to identify and develop
new opportunities for multi-modalism. Existing systems must be evaluated
and improved in line with changing trading patterns. Markets must be
studied to discern opportunities. The lead time to introduce improvements
must be short and fully co-ordinated with everyone concerned.
(b) Trading blocs such as ASEAN, the EU and NAFTA need to review the
structure of their internal and external market multi-modal systems.
402 Multi-modalism: supply chain, logistics
Countries with good multi-modal facilities have advantages when growing
their external markets and improving their systems. The more closely
trading blocs work together, the greater the benefits in market growth and
distribution arrangements. The total distribution product requires a spirit
of understanding to prevail among all parties involved.
(c) The markets of the Pacific Rim are a fast-growing and fast changing sector;
they require particular attention for agents to benefit from the opportunities
offered.
(d) The subcontinent, especially India, South Africa and China are also
developing markets with many opportunities. Multi-modalism greatly
facilitates the development of their global container networks.
(e) The role of swapbodies is fast developing, especially in European markets
involving road/sea/rail. The implications of the value added benefit of the
Channel Tunnel must also be considered.
(f) The airport and seaport – especially the latter – are key players in the
development of multi-modalism. There is a need to develop inter-modal
strategies and a strong interface with all concerned. Vision, flexibility and
pragmatism are required at all levels of the businesses.
(g) Multi-modalism supports the ‘just in time’ strategy.
(h) Major shippers, particularly the multinationals, are companies with great
investment resources and high-calibre personnel. They are leading the
development of multi-modalism in many markets. However, the smaller
shipper, who may be a subcontractor, is also benefiting from such
developments.

During the next decades the multi-modal network will continue to expand
globally, along with industrial and social economic development.

18.5 Global supply chain management and international

logistics
Associated with multi-modalism is logistics. Shippers look increasingly at the
total production and value added chain: in consequence shippers also look more
closely at the logistics part of their business. The shipper, then, is no longer
solely concerned with point-to-point operations, such as airport to airport or
seaport to seaport, but is concerned with the total product along the whole
length of the value added chain. This concern is closely associated with ‘just
in time’ management techniques.
The aim of logistics is to get the right product at the right place at the right
time. It is about the planning, organization, control and execution of the flow
of goods from purchasing through production and distribution to the final
customer and so satisfy the requirements of the market. In international dis-
tribution terms this is the process of warehousing, transporting and distributing
goods and cargo, and the positioning of containers and/or equipment. It is an
integrated and high-quality package of services which emphasize care of the
 Global supply chain management and international logistics 403
cargo and provision of the most efficient co-ordination and management of
the transport process. It comprises transport, forwarding, storage and dis-
tribution, and is adapted to the specific requirements of the product, the supplier
and his buyers: it is a total package covering all links in the logistic chain,
even though the different components can also be offered individually. It
provides on a global basis production, warehousing, distribution and transport
for shippers.
Maersk Line is a market leader in logistic services and provides a total
transport service package suited to individual manufacturers and their
customers’ needs. Examples include high value consumer goods of wines and
chemicals. Shippers are increasing their demand for supply chain visibility
and especially connectivity with the parties involved. The current trend is
towards global buying in the retail business and global selling of chemicals
and high value consumer goods. Shippers require more extensive supply chain
management services in addition to basic container shipping. Maersk Line
(which merged with P&O Nedlloyd Logistics) is involved in managing the
international supply train to supermarkets. Chemicals are progressively sold
from stock holdings closer to the destination, rather than an order that has
long delivery times. New concepts have been developed for some of the major
petrochemical companies, including virtual warehousing and pipeline
visibility.
P&O Nedlloyd operates a complete logistics system termed P&O Nedlloyd
Flowmaster (Figure 18.1), which manages the flow of goods and information.
It has these seven elements:

(a) Merchandise, in principle anything from computers to clothing and from

wood products to chemicals.
(b) Equipment, embracing ships, aircraft, trucks and Districentres.
(c) Loading units, ranging from the management, loading and repair of
containers, trailers and swapbodies to the manufacture of boxes and
crates for vulnerable cargo.
(d) Personnel: specialists who use their experience to devise a solution to
logistics problems.
(e) Payment, usually via IT.
(f) Documents: all the paperwork and file space necessary to comply with
all formalities.
(g) Information, provided on paper, telephone or by IT covering, for example,
location of goods and arrival time at a port or other facility.

P&O Nedlloyd had a sophisticated information system which is essential to

the build-up of its networks and integrated transport. It can determine the
most suitable place for a distribution centre, taking into account internal and
external factors, such as road congestion, facilities and regional market
developments.
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 Global supply chain management and international logistics 405
The development of logistics networks has emerged as a result of these
reasons:

(a) Companies increasingly concentrate on their ‘core activities’ of production

and sales.
(b) Companies are tending to decentralize their production overseas.
(c) Product life cycle is shortening so that fast and flexible distribution is
essential.

Companies are contracting out elements in distribution, such as physical

transport and storage. Distribution can be more efficient and cheaper by
employing a total transport company such as P&O Nedlloyd: the client knows
that his cargo is supervised by one agency at all times door to door.
The example P&O Nedlloyd Flowmaster system is a total transport package
suited to individual manufacturers and their customers’ needs. The
manufacturer despatches his products to a strategically located Districentre,
which is in reality a warehouse. At this stage P&O Nedlloyd the operator
assumes management and control of the operation. The benefits include:

(a) Customer services are designed and delivered to each client’s individual
needs.
(b) Fully integrated services are provided, i.e. distribution logistics are co-
ordinated with procurement and production logistics.
(c) One-stop shopping is available for logistics services, most or all services
being co-ordinated at one Districentre.
(d) Improved reliability means the client is better able to keep promises made
to customers.
(e) Broader market research is available for clients using an established
distribution system.
(f) There are shorter lead times for clients seeking to streamline their reaction
times in the market place.
(g) Increased flexibility means that a client’s market opportunities are not
limited by distribution constraints.
(h) Lower logistics costs are possible with economies of scale.
(i) Manufacturers and their clients alike seek a higher satisfaction profile.
(j) Value added benefits are derived from such services.

When P&O Nedlloyd merged with the Maersk Line in 2006 it increased its
global influence and expertise in global logistics and in international supply
chain management. Logistics is a growth market of great complexity. It is
aligned to supply chain management. It is widely used today by shippers large
and small. The global logistics operator focuses on four key areas: (a) supply
chain management – vendor management, information, communication – key
benefits are reduced inventory levels; (b) delivery and customs clearance
– inventory management, order picking, quality control, and security; (c)
406 Multi-modalism: supply chain, logistics
distribution management – quality control, consolidation and delivery and
information; and (d) import logistics and outbound distribution – supply chain
management, information and consolidation. The key results are hands-on
control of delivery schedules and reduced shipment costs from the
consolidation and integration of inwards and outwards distribution. The global
logistic supply pipeline has nine basic elements from: (a) procurement of the
order; (b) manufacturing of the product; (c) quality control; (d) handling/
packaging; (e) despatch by sea/air; (f) delivery to logistic delivery centre;
(g) handling/sorting; (h) delivery to the store; and (i) to the end consumer.
Through all the phases IT enables complete transparency of all operations to
all parties. The Districentres and Distriparks in the port of Rotterdam are
important components in the logistics market. They are a main European
gateway using multi-modalism. Major freight forwarders are logistic operators
and work with containerized shipping companies. Readers are strongly
recommended to read Alan Branch’s book Global Supply Chain Management
and International Logistics (Routledge, Abingdon, 2009).