Global Logistics Network Modelling and Policy: Quantification and Analysis for International Freight

Global Logistics Network Modelling and Policy provides guidelines on quality policy, covering investments, management and planning for port and hinterland infrastructure, roads, railways and inland waterway ports. The book first describes the authors’ concept and formulation models, followed by a description and analysis of the applied data. As shipping companies fiercely compete in an effort to achieve greater efficiency and impact infrastructure policy and plan for the entire supply chain, they need tactics that drive quality transportation policy and new ways to model and simulate worldwide cargo movements, all while estimating demand and capacity of systems.

This book provides quantitative tools for modeling, analysis, and simulation of worldwide, inter-modal cargo movement – helping forecast the impacts of logistics and related policies in each region of the world. It covers useful applications for every region of the world, allowing policymakers to tailor results for their own specific uses.

• Delivers sophisticated quantitative tools for modeling simulations, providing powerful analysis of global intermodal cargo movements
• Features examples of tools applied to logistical policy situations in every region of the world
• Serves as a bridge between theory and practice in the field of freight transportation research
• Provides detailed, data-supported case studies and real-world examples for transportation modelers, planners and policymakers

• Language: English
• Publisher: Elsevier Science
• Release date: Sep 8, 2020
• ISBN: 9780128140611

Book preview

Global Logistics Network Modelling and Policy

Quantification and Analysis for International Freight

First Edition

Ryuichi Shibasaki

Hironori Kato

Cesar Ducruet

Table of Contents

Cover image

Title page

Copyright

Contributors

Preface: Globalisation and global logistics

Part One: General introduction

1: Introduction to global container shipping market

Abstract

Introduction: Containerisation and global logistics

Economic growth and container cargo movements

Port development and terminal operations

Global maritime container shipping

Conclusion

Appendix

2: A global analysis of hinterlands from a European perspective

Abstract

Introduction

Historical origin of European hinterlands

Analysing global hinterlands in a contemporary context

Determinants of hinterland expansion and shrinkage

Variations in port choice behaviour

Conclusion

3: Cross-border logistics practices, policies, and its impact

Abstract

Introduction

Logistics performance and liner shipping connectivity

Trade facilitation, transport facilitation, and cross-border management

Logistics infrastructure investment needs to 2030/2040

Conclusions

Appendix

4: Basics of container demand forecast

Abstract

Introduction

Preparation

Step 1: Cargo attraction and generation

Step 2: Cargo distribution

Step 3: Modal split

Step 4: Route choice

Conclusion

Part Two: Model & Data

5: Basic concept

Abstract

Model concept

Entire structure of model

Other model features and future works

Structure of Part 2

6: Global maritime container shipping model

Abstract

Model framework

Shipping time function

Shipping cost function

Estimation of ocean freight charge

Model performance

Conclusion

7: Intermodal transport super-network model

Abstract

Model framework

Regional land transport submodel

Model calculation and convergence

Conclusion

8: Data [1] maritime container shipping and land transport network

Abstract

Ports: Intersection between MCS and LT networks

Global MCS network

Regional LT network

Conclusion

Appendices

9: Data [2] container shipping demand for the present and future

Abstract

Present demand

Future demand

Conclusion

Appendix

Part Three: Application to the developing world

10: Central America: Small countries with active border-crossing transport on land

Abstract

Introduction

Ports and maritime container cargo movements in Central America

Data

Calculation results

Policy simulations

Conclusion

11: Greater Mekong Subregion: Is the Mekong River shipping competitive with other modes?

Abstract

Introduction

International container transport in Cambodia

Data

Calculation results

Policy simulations

Conclusion

12: South Asia: Impact simulations of logistics projects in India, Bangladesh, and Sri Lanka

Abstract

Introduction

Ports and container cargo flow in South Asia

Data

Calculation results

Policy simulations

Conclusion

13: Central Asia: Typical landlocked region across Eurasian continent

Abstract

Introduction

Gateway seaports and access routes of Central Asia

Data

Calculation results

Policy simulations

Conclusion

14: Pacific Islands: Small and dispersed ‘sea-locked’ islands

Abstract

Acknowledgments

Introduction

Ports and maritime container cargo movement in the Pacific region

Data

Calculation results

Policy simulations

Conclusion

15: Southern Africa: Overcoming corridor and border challenges for landlocked countries

Abstract

Introduction

Regional seaports and land transport

Data

Calculation results

Policy simulations

Conclusion

16: Belt and Road Initiative: How does China’s BRI encourage the use of international rail transport across the Eurasian continent?

Abstract

Introduction

International container railway services to/from China

Data

Calculation results

Policy simulations

Conclusion

Conclusion

Author Index

Subject Index

Copyright

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Notices

Knowledge and best practice in this field are constantly changing. As new research and experience broaden our understanding, changes in research methods, professional practices, or medical treatment may become necessary.

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Contributors

César Ducruet     Centre National de la Recherche Scientifique

Masahiko Furuichi

International Association of Ports and Harbors (IAPH)

The University of Tokyo

David Guerrero     AME-SPLOTT, Univ Gustave Eiffel, IFSTTAR

Hidekazu Itoh     Kwansei Gakuin University

Takashi Kadono     NEWJEC Inc.

Hironori Kato     The University of Tokyo

Taiji Kawakami     Ministry of Land, Infrastructure, Transport and Tourism, Japan

Tomoya Kawasaki     Tokyo Institute of Technology

Masaya Kobayashi     Nippon Express Co., Ltd.

Kentaro Nishimura     The University of Tokyo

Takashi Riku     The University of Tokyo

Ryuichi Shibasaki     The University of Tokyo

Takashi Shimada     The Overseas Coastal Area Development Institute of Japan (OCDI)

Masaru Suzuki     Nikken Kogaku Co., Ltd.

Satoshi Tanabe     The University of Tokyo

Preface: Globalisation and global logistics

In our daily lives, we are surrounded by many goods from all over the world. My shirt, for example, is from Vietnam, my trousers are made in China, and my jacket comes from Italy. My watch is Swiss made, and my glasses are imported from the United States. The coffee cup on my desk is produced in France, and the coffee in it is made from blended beans from Brazil and Guatemala. Perhaps my laptop is assembled in my own country, but its parts are imported. In the same way, many goods are produced in various regions, transported across locations, and finally consumed at other places. This complicated production–consumption system has been facilitated by the globalised logistics system wherein products are transported internationally, in addition to the international movements of people, currency, and information.

The establishment of the global logistics system is the result of three major factors: technological innovation, infrastructure investment, and evolution of the institutional system. Containerisation was an epoch-making event that transformed the logistics industry from a labour-intensive to a capital-intensive industry (Levinson, 2006). Containerisation has facilitated complex cargo-handling tasks such as loading/discharging and trans-shipment of cargo to and from vessels at ports, upgraded safety standards, reduced damage to cargos, and also enabled an intermodal transport network connecting ships, railways, and trucks. Vessel design technology has also evolved, resulting in larger vessels over time (Rodrigue, 2017). The upward trend in the sizes of containerships is mainly motivated by economies of scale, which has led to a significant reduction in average cargo transport costs. International cargo traffic flows are also supported by sophisticated transactions of commercial information and currency. Notably, recent revolutions in information and communication technology (ICT) have enhanced the efficiency and safety of global logistics operations. These developments include sophisticatedly digitalised operating systems such as electronic data interchange (EDI) processing, radio-frequency identification (RFID) processing, and optimisation of cargo handling at automated container terminals (Saragiotis, 2019; Al-Fuqaha et al., 2015; Steenken et al., 2004). Regarding the institutional framework, trade obstacles due to traditional manual transactions at cross-border points have been gradually removed under the guidance of regional strategies. The liberalisation of international trade can be realised by trade facilitation and implementation of cross-border paperless trade, which includes simplifying required paperwork, modernising procedures, harmonising customs requirements, and introducing a single-window system (Tijan et al., 2019). Reductions in time and costs of cross-border point transactions enable nations to seamlessly connect with others, which can facilitate the process of evolution into an integrated global production chain.

Rapid globalisation with reduced transport costs has motivated global firms to optimise their manufacturing clusters located in regions with the cheapest labour and material costs. This significantly diminishes production and operating costs. This trend is further accelerated by a business model of horizontal specialisation at a global scale (Bloch, 1995). Firms that specialise horizontally identify a specific market to which it can offer a complete business solution, which may involve offering a wide range of components, products, and services to a narrow range of customer types (Williams and Aaron, 2018). Additionally, this business model has promoted the rapid development of manufacturing industries located in the markets of emerging economies. To keep updated, major logistics industry players have adapted to rapid globalisation. Shipping liner companies have established a global hub-and-spoke shipping network (Farahani et al., 2013). Tough competition amongst shipping companies has also encouraged mergers and acquisitions under horizontal integration since the 1990s (Notteboom et al., 2017). This has led to the establishment of giant shipping liners and promoted global strategic alliances amongst shipping companies (Crotti et al., 2019). Furthermore, the increased sizes of vessels require massive investment in port and/or canal facilities. Many governments have participated in the global competition (Parola et al., 2017) to construct large-scale hub ports to lead the global supply chain and earn benefits from saved transport costs by facilitating the movement of direct shipping services to and from hub ports. An interregional intermodal transport network has been formulated (Reis et al., 2013) under the international development strategies of regional bodies. Such efforts to improve efficiency in the global logistics system have accelerated international business activities.

In summary, the globalisation of the supply chain, in line with innovation in logistics and institutional systems and massive investment in freight transport infrastructure, has enabled many firms to diversify their procurement sources, which has led to lower supply costs. End users now have more options in consumption goods, whilst prices have also significantly reduced. This has improved the quality of life for people whilst increasing tax revenues for governments through the revitalisation of economic activities. The above-mentioned causality is supported by much empirical evidence, particularly on the significant associations between international trade and global GDP growth (Alcalá and Ciccone, 2004; Frankel and Romer, 1999) and positive impacts of the liberalisation of international trade on economic efficiency (Pavcnik, 2002; Bloom et al., 2016). Many studies have indicated that even in the least-developed countries, export growth could stimulate economic growth (e.g. Ghirmay et al., 2001) following two paths: increasing investments (capital accumulation) and enhancing efficiency. This has contributed to addressing poverty and other global issues, which are targeted by the sustainable development goals. The rapid development of the global logistics network has upgraded accessibility to and from landlocked regions where no seaport is available as well as remote areas located far from major markets (Faye et al., 2004). These improvements in accessibility have encouraged global firms to invest in such landlocked and remote areas whilst also promoting exports from those areas that could create more jobs, generate better salaries, and improve the quality of life of the people in these places. Similarly, enhancement of regional connectivity amongst nations enables the development of an integrated economic market, fosters regional competitions, stimulates international trade and leads to better economic growth even in less-developed regions.

Nonetheless, the negative aspects of globalisation also exist. A commonly discussed issue is its damaging effect on local economies and domestic jobs. Developed countries that outsource manufacturing to other regions to exploit cheaper labour costs could suffer from employment insecurity; developing countries could also be affected in their domestic employment although the impacts are still inconclusive (Lee and Vivarelli, 2006). This may lead to political movements favouring protectionism and isolationism (Stiglitz, 2017). Another issue relating to globalisation is the income inequality compromised for the sake of countries’ economic growth. This typically indicates a ‘core-periphery’ structure, wherein the core contains the major wealthy and powerful countries, with countries that cannot reap the benefits of global wealth located at the periphery (Hartmann et al., 2019). Core countries settle on a diverse set of knowledge-intensive and value-added products, and peripheral developing countries specialise in exports of simple resources and labour-intensive products to higher blocks of the hierarchy (Kostoska et al., 2020). This could be regarded as neocolonialism—the dark side of globalisation (Rao, 2000). Additionally, the world system may be more vulnerable under globalisation, as supply chain disruptions could transfer to and significantly affect international trade. Such system disturbances may be caused by natural disasters, trade embargoes, or disruptive demand change (Sprecher et al., 2015). Many researchers in recent years have highlighted the resilience and vulnerability of the supply chain (Elleuch et al., 2016). The tremendous impacts of the COVID-19 pandemic in 2020 are still ongoing.

This book attempts to provide a reference for discussions on the above-mentioned issues from a global logistics system perspective by presenting a technical tool to investigate the international freight transport network and its related policies. Part 1 contains four chapters which cover introductory topics regarding the container shipping market, hinterlands, cross-border logistics, and container demand forecast. Part 2 presents the model and data, which are complemented with quantitative simulations and later applied to case studies in many regions. A macroscopic network modelling technique is employed to analyse cargo flows in international freight networks. The practical modelling approach enables us to examine the expected impacts of the logistics system changes in a realistic manner. As explained earlier, these logistics changes include technological innovation, infrastructure investment, and evolution of the institutional system. The proposed simulation model can assist in evaluating the policies intended to change the logistics system in terms with their impacts on accessibility, traffic volume, trade patterns, or share of transport modes. Their expected influences on regional/local economic performance could also be discussed if the logistics network model is integrated with another international economic simulation model. The logistics transport network assumed in this book’s model covers multiple transport modes, including maritime shipping, railway, trucks, and inland waterway transport, although maritime shipping should be highlighted since its role is dominant in international trade. Part 3 demonstrates a series of cases wherein the proposed model is customised and applied to seven regions across the world. They highlight the logistics network in developing countries since the major problems in logistics systems are observed in less-developed regions. These case studies are expected to contribute to the policy debates in each region.

The unique contribution of this book is in providing a useful tool and verifying its application in various regions for the decision-making of stakeholders in logistics industries, related government authorities, and international donors concerned with global issues. We hope that our modelling approach can assist various individuals, such as supply chain and logistics professionals, university students interested in logistics and freight transport, and experts in logistics and transport planning/policy in exploring novel directions in logistics research.

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Part One

General introduction

1: Introduction to global container shipping market

César Ducrueta; Hidekazu Itohb    a Centre National de la Recherche Scientifique

b Kwansei Gakuin University

Abstract

This chapter recalls and demonstrates deep changes in the way maritime transport had been reorganised with the ongoing advent of containerisation in the past decades up to the present time. This multifaceted approach to containerisation is not so common as often, specific aspects are well covered and analysed by scholars and professionals but without offering an all-encompassing view. A review of the complex and changing relationships between containerisation (technological change) and economic development, port and shipping line operations, and related impacts on former ways of doing things is necessary before widening the approach to other segments of the global value and supply chain, such as hinterlands and shipping networks, as described in the other chapters.

Keywords

Containerisation; Liner shipping; Ports

Introduction: Containerisation and global logistics

In 26 April 1956, an American land transporter named Malcom McLean started competing with freight railway companies on interstate long distance transport in the United States. He first navigated a hopped-up container ship from Newark, New Jersey, to Houston, Texas, along the US East Coast by his shipping company (later named Sea-Land). Maritime containers were acquired for two main purposes: (1) to reduce port handling costs by the unitisation (container ‘box’) of cargo and (2) to reduce truck transport cost on long-distance delivery. Indeed, the container ships are permitted to deliver cargo through intermodal transport on land and sea (Levinson, 2006).

The strongest advantage of containerisation is that cargo handling on the docks could be managed in a more efficient way. At this time, a container was mounted on a wagon for land transport, or current roll-on/roll-off (Ro-Ro) shipping. However, because the system was initially inefficient due to the weight and space of wagons, container ships used cranes to handle the box between the ship and the yard. Finally, the Sea-Land company launched a modern full-container ship without crane onboard in 1966 to cross the Atlantic, as European ports such as Antwerp became able to handle containers in the late 1960s (Morel and Ducruet, 2015). After certain technological progress, gantry cranes were placed on berths to carry containers between the ship and the terminal, whilst chassis and trailer moved containers inside the container terminal.

Containerisation helped reducing handling time on both sea and land sides. At the time of early containerisation, the total duration of a round trip in the Pacific Ocean between East Asia (e.g. Kobe, Japan) and North America (NA) (e.g. San Francisco, US East Coast) by conventional ship (general cargo) was about 80 days (35 days on sea and 45 days on land) in 1956. However, in 1968, after full-container ships were launched, and the total duration of a round trip decreased to 30 days (23 days on sea and 7 days on land) between Tokyo and Los Angeles (Hoshino, 1995). Containerisation had contributed to minimising the temporal gaps between origin and destination along supply chains, whilst accelerating global trade and horizontal division of production. In 2017, because of slow steaming and multistops at hub-ports, most of round-trip durations were 35 days (5 weeks) or 42 days (6 weeks) on the route (International Transport Handbook, 2017), as explained in the following.

Finally, maritime transport business had changed from labour-intensive to capital-intensive industry. For example, global major ports have invested heavily in new gantry cranes for faster handling operations. In addition to container terminal development, container ships grown in size to achieve economies of scale. Indeed, after the introduction of over-Panamaxa vessels in 1988, shipping lines built ever-larger container ships (Table 1.3). Such vessels again needed investments on the terminal side to accommodate ship calls all over the world. Deeper container berths, mega-gantry cranes, and larger container yards became the norm for terminal operations. For instance, such cranes must be cover 24 lines for the beam of 18,000 TEUs class container ships today.

Such operational and technological changes are both causes and consequences of wider global economic (e.g. manufacturing shifts) dynamics affecting the global port hierarchy, as presented in Table 1.1 for the period 1975–2016. In 1975, most of the top ranked container ports were North American, European, and Japanese ports due to the provision, in the ‘Triade’ (Ohmae, 1985), of container berths with gantry and terminal cranes that were still lacking at developing countries. However, in 2016, 7 of the top 10 ports were Chinese (including Hong Kong), following high economic growth and rapid port development since the 2000s. The other three major ports are also in Asia, like Singapore, Busan, and Dubai.

Table 1.1

From Containerization International, 2009. Containerization International Yearbook. Informa UK Ltd, and United Nations, 2016. Review of maritime transport. In: United Nations Conference on Trade and Development, Geneva.

Despite their initial domination within Asia, Japanese ports, especially the port of Kobe, had been taken over by other East Asian ports, especially by the port of Busan due to network effects and the 1995 Hanshin Earthquake (Xu and Itoh, 2018). In a similar vein, and after playing a crucial role as a gateway and hub for mainland China due to its pre-1997 status as an independent city-state with Western trade practices, Hong Kong lost cargo in the last decade to Shenzhen. By contrast, Singapore maintained its port growth as the transit point between Pacific Ocean and Indian Ocean connecting Asia with Europe, and by providing highly frequent feeder services to neighbouring Southeast Asian countries. Yet, competitors started to emerge such as Tanjung Pelepas in Malaysia (2000), Cai-Mep Thi-Vai in Vietnam (1996), and Jakarta/New Priok in Indonesia (under construction) to provide alternative transit points and enhance their respective local economies.

In this chapter, we discuss the changes in maritime and port logistics caused by containerisation in the last 50 years. In "Economic growth and container cargo movements section, we show the impact of containerisation on the world economy and global maritime networks including supply chain. Port development and terminal operations section discusses the function of container terminal enhancing maritime transport and connecting the land and sea transports, especially the constraints and challenges of port development for larger ships, and the port management and terminal operation. In Global maritime container shipping" section, we present operational logics of shipping lines and alliances whilst providing concrete empirical evidences on changing patterns of global container flows. As reference, Chapter 2 discusses port hinterland which is the connection to port on the land side with shippers.

Economic growth and container cargo movements

The innovation of containerisation in maritime trade cause a rapid expansion of global trade (see also Bernhofen et al., 2013). Fig. 1.1 compares the evolution of different maritime trades in the last four decades (the handling level of 1990 is the baseline). Most of the goods shipped in containers being general cargo, or intermediate and finished goods, container traffic had expanded much quickly than general cargo, especially after 1998 (see also Fig. 1.4). Indeed, a growing share of general cargo had become containerised in the last two decades. In addition, the impacts of global recession for maritime trade were much bigger on container than on general cargoes.

Fig. 1.1 The relative expanding speeds of maritime trade. World Bank Open Data, and UNCTAD Stat.

The relationship between maritime trade, especially containerisation, and economic activities, Fig. 1.2, shows the increasing rate changes of container handling volumes (TEUs) and dry cargo (ton base) compared to Global Domestic Product (GDP) in the last four decades or so. Except for 1998 and 2009, the growth rate of container handling volumes has been higher than that of dry cargo and GDP. The average growth rate of container handling volume is about 9.6% as compared to 4.1% for dry cargo and 3.0% for GDP. On the other hand, the standard deviation of container handling growth rate is 5.8, as compared with 5.0 and 1.3 for dry cargo and GDP, respectively. Several factors explain such a result. First, handling items in containers are mainly high value-added goods (i.e. consumption and intermediate goods), so the demand for container transport is less stable than that for general cargo and natural resources (i.e. bulks). Second, container handling is highly connected with economic circulation. For example, the correlation coefficients of the growth rate with GDP are 0.66 with container and 0.47 with dry cargo. Third, slowing of trade, or increase in global GDP, is higher than that for global trade, as the Lehman shock ended in 2017 (CPB Netherlands Bureau for Economics Policy Analysis, 24 November 2017).

Fig. 1.2 The increasing rate changes of container, dry cargo, and GDP. World Bank Open Data, and UNCTAD Stat.

When observing the growth rate of container handling volumes and GDP by countries (see Appendix, Table 1.A1), again, the growth rate of container handling was found to be higher than that of GDP. However, the current Chinese growth rate of container handling remains rather moderate, whilst that in Hong Kong has been negative in the last 5 years. The centre of gravity of economic expansion had, indeed, shifted toward South Asia, like Indonesia and Vietnam (Itoh, 2012).

Fig. 1.3A and B show the relative scales of container handling volumes and value-added goods (GDP) by regions/countries (see Appendix, Table 1.A2). Until the mid-1990s, most of the container traffic was handled in advanced economies and regions as mentioned earlier, until Chinese ports increased their share after 1995, and especially in 2001 [entry of China in the World Trade Organisation (WTO)]. Currently, the total Chinese share including Hong Kong is more than 30%, whilst European ports witnessed a decrease from 30% in 1975 to 12% in 2015. Although Hong Kong had increased its global share until the middle of 1990s, its share was taken by the mainland Chinese ports by the container terminal developments, turning it into a global financial and value-added centre instead of a cargo handling hub (see Wang and Chen, 2010).

Fig. 1.3 The shares for global total by countries/regions. (A) Container handling volumes. Based on the data from Table 1.A2A; (B) Gross domestics products (GDP). Based on the data from Table 1.A2B.

Fig. 1.4 The correlation coefficient between GDP and container shares. This figure is based on the data sets on Table 1.A1A and B.

On the other hand, the relative shares of GDP have been changing more smoothly than that for container handling. For example, although the Chinese economy including Hong Kong occupied about 12% in 2015, the advanced economies, like NA, Europe (Germany, United Kingdom, and France), and Japan still take their position to some extent. This result is partly due to the fact that container handling volumes are sometimes inflated by official statistics because of large transshipment volumes, leading to double counts of each container move.

Until the end of 1990s, the relative changes in economic activities (GDP) and cargo movements (containers) had maintained relatively tight linkages. In Fig. 1.4, the correlation coefficients between the relative shares of GDP and container handling on countries (see Appendix, Table 1.A2) had been increasing until 1999. The decrease after 2000, including China’s entry in the WTO and the global financial crisis effects, can be explained by the rapid progress of supply chain development in emerging economies (i.e. BRICS countries), especially in Asia, and a growing imbalanced international horizontal division of production