SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

CHAPTER II:

BASICS OF MULTIMODAL
TRANSPORTATION
I. MEANING AND DEFINITION OF MULTIMODAL TRANSPORTATION:
A. MEANING:
Multimodal transport is the transportation of goods under a single contract, but
performed with at least two different means of transport; the carrier is liable (in
a legal sense) for the entire carriage, even though it is performed by several
different modes of transport (E.G. by rail, sea, road and air). The carrier does not
have to possess all the means of transport, and in practice usually does not; the
carriage is often performed by sub-carriers (referred to in legal language as
“actual carriers”). The carrier responsible for the entire carriage is referred to as
a multimodal transport operator, or MTO.

B. DEFINITION:
International Multimodal Transport Association defines multimodal
transportation as “the chain that interconnects different links or modes of
transport – air, sea, and land – into one complete process that ensures an efficient
and cost-effective door-to-door movement of goods under the responsibility of a
single transport operator, known as a Multimodal Transport Operator (MTO), on
one transport document”.

II. FEATURES OF MULTIMODAL TRANSPORTATION:

1. Multiple Modes:
As the name itself goes, Multimodal Transportation, there are multiple modes that
can be chosen by the carrier for providing the transportation services. Furthermore,
the carrier can adopt any mode from land, air, water pipelines as well as any means
such as trucks, tempos, lorries, trains, jets freight ships etc. in any combination
such that the overall cost of transportation is minimal.

2. Single Contract:
The cargo transportation under multimodal transportation undergoes a single
contract over the entire route irrespective of the number of trans-shipments points,
modes of transports, means of transports or such other related factors involved in
the entire process.

Page 1 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

3. Single MTO:
A multimodal transport contract is undertaken only by a single transport operator
who is known as the Multimodal Transport Operator (MTO). The contract is given
only to one company who acts as the MTO and is responsible for the cargo, its safe
delivery, coordination with all the modes and means, control over cargo
transportation along the entire route.

4. Single Tariff:
The MTO charges a single tariff plan to the supplier/buyer, as the case may be, for
providing the entire transportation service right from the place of origin to the
destination. Thus, the client doesn’t have to make recurring payment for door-step
deliveries. Such single tariff plan includes the transport cost through various
modes, the cost of support services, cost of ancillary services as well as the profit
element of the MTO.

5. Containerization:
The multimodal transport ideally takes place though use of containers. Goods are
transported in bulks through containers of various shapes and sizes. This helps to
maintain the safety of the cargo as well as helps in reducing the cost of transporting.
Containerization is a very effective measure in transporting goods on longer and
unstable routes as they not only help the cargo to be safe but also makes the shifting
of cargo from one mode to the other less cumbersome.

6. Sub-Contracts:
In case where the MTO finds isn’t able to efficiently provide any service or has
trouble in executing a very large contract, the MTO may sub-contract a part of the
main contract to some other transport party who will perform the same services as
that of the main MTO except for the fact that the sub-contractor shall not be dealing
directly with the main client. The sub-contractor shall be receiving his dues from
the main MTO and not the client.

7. Efficient Interchange Services:

To provide multimodal services in the most effective manner, it is very essential that
the MTO has very effective interchange service system. The manner of transfer of
cargo from one mode to the other, the process, safety, cost, etc. involved in the same
must be well managed by the MTO. The MTO must also consider the lay time (the
loading and unloading time) and try to optimize the same so that the demurrage
and storage cost reduces and the cargo reaches the destination on time.

Page 2 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

III. COMPONENTS OF MULTIMODAL TRANSPORTATION:

A multimodal transport system is a combination of various components. Each of the

components has its own specific purpose which must be kept in mind by the MTO in the
process of providing multimodal transport service. Each component has its own pros and
cons, the MTO has to decide which of the components are best suited for the client
depending on the nature of the business as well as the cargo. Following are some
components of Multimodal Transport:

1. Transport Modes:
The various modes of transport are the primary components in providing the
multimodal services. Each of these modes must have a well-defined route such that
the MTO is in a position to decide the routing and scheduling of the entire journey.

2. Transport Means:
A transporter is always faced by the challenge of selecting the right mode. Once the
said challenge is faced, the next is selecting the most appropriate means of
transport. The transporter is often made available with wide choices of means to
select. Depending on the nature of the product, the time and budget constraints of
the client, the MTO selects the most appropriate means.

3. Depots & Terminals:

These are the Origin, Destination and Halt Points that the cargo faces during its
journey. When the mode has to be changed, it happens at one such terminals. At
times at these terminals provide a lot of various services to ease the transport
journey. The MTO must make sure that a terminal is well equipped for the type of
services that are required for the specific cargo journey.

4. Packing:
Often, during long journeys the cargos must be well packed so that it doesn’t get
damaged. Also, certain specific countries require standardized packing as per their
policies. In such cases the MTO has to make sure that the cargo is packed in the
said manner before it is dispatched.

5. Loaders:
The cargo must be loaded and unloaded from the vehicle at every step of the
transport whether it is done using containers or without them. When transportation
is done using containers, the MTO must make sure that the terminals are equipped
with the required tools and machineries to transfer the loaded containers from one
vehicle to the other.

Page 3 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

6. MTO:
Multimodal Transport Operator (MTO) is the link between the seller, various
transporters and the buyer. An MTO takes care of the entire process right from the
time of picking up the cargo from the seller till delivering it to the buyer at his
doorstep.

7. Systems and Software:

An efficient multimodal system can only be established using Information
Technology and various supporting software that will not only ease out the whole
transportation activity but will also enable the MTO to keep a track on all the aspects
of the journey and transaction.

IV. ELEMENTS/PRINCIPLES OF MULTIMODAL TRANSPORTATION:

A multimodal transport system is a combination of various elements. Each of the elements

of this system must work in a harmonious manner to provide and effective efficient service
in the most reasonable cost possible. Such multimodal services cannot be executed in
isolation or lack of co-ordination between the elements that comprise the services of
Multimodal Transportation. Following are some elements of Multimodal Transport:

1. System Concept:
As seen above there are a lot of systems that exist in a multimodal transportation
environment depending on the various nature and leg of the multimodal
transportation. Almost all of the systems are both closely or remotely related and
interdependent on each other as well as function together for an efficient service
provision.

2. Management & Co-ordination:

Management is one of the key elements of the MMTS. The entire MMTS is based on
various stages of transportation and other logistical operations. These stages must
all exist in harmony as well as they should all support the existence, operations and
delivery of an efficient transport service. For this the management of the company
must be well aware of all the different legs, their pros and cons, costs etc. so that
the MTOs serves their client in the best possible manner.

3. Control Over Cargo:

The Cargo is the most sensitive element of them all. Cargo is the fundamental
element for which the entire process of Multimodal transport is undertaken. Since
the whole of the Multimodal transport journey happens in different legs or phases,
it may prove cumbersome as well as risky to move the cargo every time. When a
Multimodal Transport Contract is entered by the parties, the responsibility of the
cargo is shifted to the MTO. The MTO thus has complete control over the cargo
which enables him to take the necessary decisions in the best interest of the cargo.
Page 4 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

4. Containerization:
The transport of cargo in MMTS is generally using standardized containers. These
containers are a great measure of safety of the cargo and play a major hand in the
ease of transferring the cargo from one vehicle to the other in the event of change in
the transport mode or means. The containers of various types and styles prove to
be a very useful in difficult and long journeys.

5. MTOs:
The facilitator that provides a multimodal transport is knowns as the Multimodal
Transport Operator (MTO). The MTO is the most important element in the effective
and smooth execution of the entire multimodal transport operation. The MTO is the
one that co-ordinates all the activities right from the time of pick-up from the seller
till delivering it to the operator. There is only one MTO that serves the client, but if
the transaction is very complex he may appoint sub-operators to reduce the burden.

6. Modal Integration:
The concept of multimodal transportation revolved around more than one mode of
transportation. As much as it seems interesting and a simple process,
transportation using more than various modes an extremely complex function to
perform. The MTO has to keep in mind the pros and cons of each mode and the
impact it may have on the effective modal choice, safety of products, delivery
timings, cost of the service, legal considerations especially in case of international
transactions and such other factors that affect on various modes.

7. Information System:
Having said that the Multimodal Transport System is a complex process, once can
definitely say that it’s a system that comprises of various sub-systems that need co-
ordination and integration between all its elements. In the age of technology where
all the industries are adopting automation, Transportations industry is not behind
as well. There are encumber of technological developments, IT developments and
automations that enable the MTS to functions really well. This is an element that is
perennial as well as dynamic.

8. Logistics Channel:
MTS is a wholesome system that not only covers the basic transportation services
from seller to buyer but it also covers a major part of logistics channel as well. MTS
considers the transportation services using multiple modes and various means.
Storage and warehousing is also an integral element of the MTS because the goods
have to be stored at various terminals until the time of dispatch. Understanding the
other elements of logistics and supply chain are essential for the MTO to provide a
service which is directly going to affect the MTS.

Page 5 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

V. OPERATIONAL SYSTEMS IN MULTIMODAL TRANSPORTATION:

The above components as well as the elements, in addition to some more, may vary from
activity to activity, process to process and system to system undertaken by the MTO.
Under every activity or system, the components and elements may change depending on
the nature of the system, type of product, vitality of the matter or any other factor
contributing to the overall system. Following are the various mix of components along with
elements based of various factors. Under each of the systems, the main aim is to see the
flow from supplier to customer. Each system shows how individual components behave in
correlation to the elements under various systems.

1. Physical Base:
The most tangible and apparent system of the Multimodal Transport System (MMTS)
is the Physical Base. This system deals with the entire transport journey including
the various aspects of transportation. Here the goods are stored by the seller at a
warehouse (Depot) before releasing them to the supplier. Once the order is finalized,
the MTO is appointed who will pick up the cargo from the Warehouse of the Seller.
Once the cargo is collected, it is sent to the nearest terminal using either road ways
or railways. This transport is known as the inland transport/ movement. Once at
the terminal, the cargo is then transferred to the plane or the ship, as the case may
be. Once the Airplane or the Ship arrive at the terminal of the buyer, the entire cargo
is again transfer the same at the door step of the buyer using the inland movement.

2. Commercial System:
Generally speaking a commercial system consists of all the process in the transport
service. The order placement, dispatch planning, transport, documentation, packing
and unpacking loading and unloading etc. Under this system the MTO has a lot of
activities to be performed; beginning with the orders and their management. Here
the cost and the delivery pattern of the cargo is decided. This usually depends on
the manner of delivery required by the buyer, the time available as well as nature of
the goods in the cargo. Based on this an estimated quotation is given by the MTO
to the client. The packing of the cargo takes place once the cost is negotiated. The
Cargo is then moved within the boundaries of the nation to reach the desired port.
From the port of the seller the goods are sent to the buyer’s port. Again, in the
reverse order, once the cargo reaches the buyer’s port then through inland
movement, the cargo is made available to the buyer. After unpacking the cargo and
the final approval from the buyer, the delivery is complete and the payment is
released.

3. Administration & Co-Ordination:

This system basically deals with the management of cargo once it has been picked
up from the seller. This basically begins with the packing of the cargo and placing

Page 6 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

it in the containers. The next step is space management within the containers by
positioning the cargo in the most convenient manner using the:
(a) First Port Call principle i.e. the placing the earlier dispatches on the top, such
that the cargos are placed.
(b) Cargo Weight i.e. the lighter cargo is placed on top of the dense and heavy cargo.
(c) Cargo Nature i.e. the dangerous and sensitive cargo is placed on the upper deck
to avoid the damage and leaks and ensure the safety.

The containers are transported to the main terminals through inland

transportation. Once the containers reach the terminals the Terminal Operations
are undertaken. Here the details of the containers, cargo, quantity, nature of cargo,
source, destination etc. are checked and the transport manifests are prepared. After
the preparation of manifests, the containers are planned for Ship Stowage. In naval
architecture Ship Stowage Plan refers to the amount of space available for stowing
i.e. storing the cargo aboard on the deck of the ship or in the airplane.

4. Flow of Information:
This a system where the MTO has to deal mostly with the cargo handling before the
dispatch to the buyer. The MTO has to undertake all the responsibilities to
smoothen out the process of cargo handling on behalf of the seller. In return of the
same, the MTO charges the seller for the shipment services. These services begin
with the order booking. Here the seller places the order for the services which is
thoroughly analysed by the MTO. The MTO analyses the requirements of the seller
as well as the buyer and based on the resources available designs a plan to execute
the cargo handling. Then a Waybill is issued. It is a document issued by a carrier
giving details and instructions relating to the shipment of a consignment of goods.
Once the waybill is issued, the MTO generates the invoice in favour of the party.
Later a Manifest is generated and delivery instruction are given. The delivery
instructions are a detailed set of guidelines for the manner in which the goods are
to be placed for delivery at every different leg of transport, these guidelines are keep
in mind various factors affecting the cargo and its transportations viz. timings,
nature of goods, climatic condition, mode and means of transportations etc. Once
these delivery instructions are in place the cargo is released.

5. Liability Network:
This is a system which takes care of the entire network to be established for the
purpose of transporting of cargo. Here the MTO is in continuous contact with the
forwarders and the other agents in the entire channel of transportation as the
person responsible is MTO himself. The MTO fixes the liability and responsibilities
of all the various entities involved in the transportations, towards the cargo, journey,
deliveries etc. Thus, the MTO monitors all the activities of the forwarders. There is
a continuous check on the Railways, Ships and the planes carrying their cargos to
the depot. From the depots, the forwarder again takes charge of delivering the goods
from the depots to the buyer’s desired destination.
Page 7 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

DESTINATION/
CUSTOMER
SUPPLIER
ORIGIN/

Page 8 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

VI. CRITICAL EVALUATION OF MULTIMODAL TRANSPORTION:

A. Advantages of Multimodal Transportation:

1. Single point of contact:

Shipper has to deal with and entirely rely on a single counterparty i.e. the
multimodal operator (MTO). The shipper doesn’t have to waste his time in contacting
and coordinating various activities and different personnel for transport services. It
thus helps in reducing wastage in time.

2. Reduces burden of documentation and formalities:

A single contract can be negotiated with the MTO. There is a single responsibility
and uniform liability regime. Thus, the burden of issuing multiple documentation
for each segment of transport is reduced to minimum.

3. Saves time and cuts pilferage at the points of trans-shipment:

The MTO maintains necessary communication links and coordinates with each
party throughout the logistics chain, reducing risks of loss of time, pilferage and
damage to cargo at trans-shipment points.

4. Reduces cost:
The MTO, being an intermediary, can manage to get attractive freight rates. This
brings down the overall logistics cost for the shipper and in the long term, increases
demand. Indirectly, it also brings down cost of exports making them more attractive.

5. Makes the best of each mode:

It is possible to combine the specific advantages of each mode in the trip such as
flexibility of road haulage, larger capacity of railways and the lower costs of water
transport in the best possible fashion.

6. Frees up working capital:

An indirect benefit to the shippers is that faster transit times allows companies to
keep less inventory on hand which in turn frees up precious working capital.

7. Better distribution of wealth:

Multimodal transport brings down the virtual distance between the origin and
destination of cargo. This helps in shifting industrial growth from the traditionally
developed coastal regions to the landlocked interiors of the country.

8. Market Coverage Maximizes:

The markets is psychically reduced by faster transit of goods; Reference to
Globalization challenge, the distance between origin or source materials and
customers is getting to be insignificant thanks to the development of multimodal
transport.
Page 9 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

9. Single Operator:
The consignor / consignee has to deal with only the MTO (multimodal transport
operator) in all matters related to the goods transportation. The MTO is solely
answerable to the client as the contract is signed with the MTO. This results in ease
in managing the entire operation.

10. Specialities of Every Mode:

Multimodal services are transportation using multiple modes and means of
transportation such that the MTO takes into account all the advantages and
disadvantages of different modes of transport, their maximum control and use. This
also helps to increase the overall efficiency and reduces the cost of operations.

A multimodal transport system usually enables the shipper to enjoy certain additional
value-added services. One or more of the following services may be provided by MTOs –
 Consignee billing
 Logistical support (inventory control, distribution and reporting) for time sensitive
products
 Pickup-on-call for air freight
 Electronic tracking of shipments
 Delivery confirmation service

The multimodal transport sector is still nascent. With growth comes competition. The
key differentiator among the MTOs would then be quality of service as indicated by factors
like speed, door-to-door capability, reliability, security, safety, flexibility and availability.

B. The Challenges or Limitations of Multimodal Transportation:

For developing an efficient intermodal/multimodal transport system, the need of the

hour is to look into the three principal issues – infrastructure development,
regulatory / policy reforms and investment in technology.

1. Infrastructure development:
Intermodal/Multimodal transport builds on the operational efficiencies of the
transport system. Without adequate infrastructure, the incremental benefits of
intermodal transport will be negligible. Necessary infrastructure development to
provide for compatibility between modes, less friction costs low dwell times, less
pilferage and increase in containerization is basic to growth of intermodal transport.

2. Regulatory reforms:
Intermodal/Multimodal transport operations need to be appropriately regulated
with an objective of controlled development of the sector, driving growth while
Page 10 of 11
SYBTM (Sem IV) Chapter II Multimodal Transportation (MMT)

mitigating possible risks. Generally, controls may be placed on licensing, pricing,

contracting and service standards. For the growth of international intermodal
transport, necessary changes may be required in the customs procedures and
export-import procedures among others.

3. Investment in technology:
An Intermodal/Multimodal operator enters into a single contract with the shipper,
but multiple contracts with transporters, customs agents, ports / airports, railways,
warehouse operators and other related entities/The voluminous documentation
requirements and need to coordinate with a number of parties creates a need for
appropriate information technology support. Additionally, the transport and
warehousing technology must itself be up-to-date to facilitate accurate tracking of
shipments and reduce logistics cost and time.

4. Co-Ordination:
One of the most important and crucial element of Multimodal Transportation is the
co-ordination at various legs of the transportation process. Easier said than done,
the co-ordination is the most challenging part for an MTO as it involves a lot of
parties of transportation as well as ancillaries such as loaders, agents etc. The MTO
must have good communication and management skills in order to have a smooth
co-ordination.

5. Skilled Manpower:
There are numerous aspects in the MTS which require attention from skilled and
experienced workforce. Unfortunately, there is a dearth of such trained and skilled
manpower as well as equipment in this sector. There is an abundant availability of
blue-collared workers like drivers, loaders, guards and so on but there is a limitation
for experts in navigation, IT, systems planning etc.

6. Low Automation:
Overall, there is no legal framework in place to recognize documents exchanged
electronically in relation to e-commerce, e-signatures, and e-payments. In fact,
current laws require extensive use of paper receipts to be issued for all transactions,
although the Government is reviewing legislation and assessing, among other
things, the recognition of electronic format. Most stakeholders in the trade
transaction process also lack automation systems, and where they exist their
implementation levels could be further improved. Documents, forms, laws, and
regulations are not always available online while data sharing electronically is
completely lacking between agencies.

Page 11 of 11