Intermodal Transportation and Terminal Operations Transportation Logistics Spring

Intermodal Transportation and Terminal Operations Transportation Logistics Spring 2009

Intermodal Transportation • Includes more than one mode – air, rail, road, water – only truck is only practical single mode trip • Typically refers to containerized goods – as opposed to bulk or general cargo – requires containers – less labor than traditional freight handling • The majority of the costs are incurred between modes (in terminals)

Bulk Cargo Wet bulk cargo refers to fluids like oil Dry bulk cargo refers to non-fluids such as grain, coal, etc. . Many goods that used to be shipped as bulk cargo (grain, bananas, coffee beans) are now shipped in containers (IP grain) Historically well developed commodities

General Cargo • Whatever needs moving • Flatbed trucks for odd-shapes • General cargo vessels

Intermodal Containers

Primarily International

There are many varieties of containers…. • • Standard containers (20’, 45’ height 8’ 6’’) Hard top containers (removable steel roof) Open top containers Flat racks Domestic containers (53’) Refrigerated containers (require clear space) Tank containers High cube container (9’ 6’’ tall) • One 20’ container is a Twenty foot Equivalent Unit (TEU)

Marine Terminal Actors • • • • Steamship lines (APL, Cosco) Terminal Operators (MTC, SSA) Port Authorities (Port of Seattle) County Governments (Pierce County Terminal) City Governments (City of Seattle, Seattle DOT, WSDOT) Security agencies (DHS) Drayage drivers and Licensed Motor Carriers Importers or Shippers (Wal. Mart) Freight forwarders and expeditors 3 PLs or Logistics providers Customs brokers CBP Labor Unions (ILWU, Teamsters) Interest Groups (Waterfront Coallition) EPA Railroads Own objectives and remuneration or incentive schemes

Intermodal issues • Transportation agencies are still structured around modes • Transportation companies are still structured around modes, in fact they had to be during regulation • There has been much growth in intermodal transportation companies since deregulation (3 PLs, IMCs, and to some extent Steamship lines) • Transportation infrastructure is build by modal agencies that historically did not interact

Terminal • • • A station where freight is received or discharged Situated at the end Placed at a boundary A point or part that forms the end From terminus (end) • The name reflects their historic role • In the intermodal world we usually refer to intermodal yards rather than terminals

Terminals or interchanges occur in all modes • • • Airports Bus terminals Marine terminal or port Ferry terminal Train station Rail yard or terminal Cross-dock facility Distribution center Intermodal yard • They have common characteristics, I’ll focus today on marine ports and intermodal yards

Characteristics of Freight Terminals Infrastructure Modal access (dock, siding, road), unloading areas Equipment Intermodal lifting equipment, storing equipment Storage Yard for empty and loaded containers Management Administration, maintenance, access (gates), information systems Trade facilitation Free trade zone, logistical services Distribution centers Transloading, cross-docking, warehousing, temperature controlled (cold chain) Storage depot Container depot, bulk storage Container services Washing, preparation, repair Core Ancillary

Container Handling Cause Outcome Consolidation Transferring the contents of smaller containers into larger containers (e. g. three maritime 40 foot containers into two 53 foot domestic containers). Cost savings (number of lifts). Time delays. Weight compliance Transferring the contents of heavy containers into loads meeting national or regional road weight limits. Palletizing Placing loose (floor loaded) containerized cargo unto pallets. Adapting to local load units (e. g. europallet). Demurrage Handing back containers to owner (maritime shipping or leasing company) by transferring its contents into another load unit (e. g. domestic container). Equipment availability Making maritime containers available for exports and domestic containers available for imports. Trade facilitation. Supply chain management Terminal and transloading facility as a buffer. Delay decision to route freight to better fulfill regional demands. Perform some added value activities (packaging, labeling, final assembly, etc. )

Shipping Lines and Importers have different goals for container management Advantages Disadvantages Importers Transloading costs. Loss of at least one day of inland transit time. Reduction of unit transport costs (three Possible shortage of maritime 40 footer containers into two domestic containers. domestic 53 footers). Not all cargo suitable. Added-value activities (sorting, packing, Reconciling different labeling, etc. ). container loads Routing flexibility through (additional delays). postponement. Risk of damage or theft of cargo during transloading. Maritime shipping Limit repositioning of empty containers. Risk of container damage. Higher asset utilization (faster container Less equipment available turnover). inland for exports.

Port Operations Quay Crane Vessel Chassis Local Storage Gate Discharging container flow Loading container flow

Wheeled versus Grounded

Port productivity metrics • • • TEUs per hectare TEUs per annum Dwell time Terminal time Crane productivity – Crane cycle time – Lifts per hour – Moves per hour

Port Characteristics • Hong Kong and Singapore, the traditional Asian hubs are trans-shipment facilities • New Asian ports in China are export facilities • US Ports have historically served as storage facilities, storage has been cheap (sometimes free) • Land has historically been inexpensive in the US but labor has been costly

While throughput has increased dramatically density has not

West Coast Terminal Area has increased

Primarily at California ports

Similarly with berth length

Throughput density (TEUs/acre) variation across west coast ports

Berth length (TEUs/ft) utilisation at west coast ports

Operational Improvements • Technology implementations – RFID, GPS, OCR, automation • Land area utilization (stacking) – Rail mounted gantry cranes • Extended gate hours • Truck appointment systems • Crane Utilization – Double cycling • Increase Intermodal Percentage – containers typically have shorter dwell times

Productivity Improvements • As is true across the board in transportation, infrastructure is expensive to build, or impossible to build • Solutions must be found to manage demand utilize infrastructure better • There is evidence our ports are “unproductive” and that we can expect better utilization of the infrastructure

Global Comparison

Average crane productivity at different container ports

Transhipment percentages at Asian ports

Facility Location Prof. Anne Goodchild Spring 2009

Facility Location • Locating a facility – Distribution center – Store – Factory – City • Why is there a city in Seattle, San Francisco, New York……. ? • Why is there a warehousing district in the Kent Valley?

What about inventory cost? • With same operational practice inventory cost is the same. • Not comparing different logistical structures or inventory management strategies.

Facility location problem solution approach • Minimize distance traveled: – Between customers and facility – Between suppliers and facility – both • Discrete locations to consider – With locations of customers and suppliers known we can use numerical optimization methods – As with some of the other optimization problems, the problem can get very large very quickly so there are heuristic methods for solving the problem reasonably well in a short amount of time

Single Facility Location Problem • A facility can be a machine, factory, retail outlet, etc. • For each customer – Calculate frequency of visits – Calculate cost of visit – Minimize total distance traveled by all customers

• Distance Metrics – L 1: Manhattan distance: X+Y – L 2: Euclidean distance: sqrt(X 2+Y 2)

Solution Methods • Brute Force: calculate the cost from every origin to every possible location – Quickly becomes infeasible – Possible locations are typically limited and the problem is solve using optimization software • Assume demand can be described by a mathematical function, f(x), where x may be a vector, and use an approximation

Example 1 • Freight is to be exported from a region of variable width, lying on one side of a transportation artery that is 1000 miles long. • Use the L 1 distance metric • Demand density is 5 units per mile for the first 300 miles, and last 300 miles, but 1 for the middle 400 miles. • What is the optimal location of one terminal? • Cost of travel is $1/mile/unit

Multiple Facility Location Problem • Locate more than one facility • The problem quickly gets very large with multiple locations and customers, so the brute force method is not recommended • Many heuristic methods exist that lead to optimal or near optimal results with fewer computations

Example 2 • Freight is to be exported from a region of variable width, lying on one side of a transportation artery that is 1000 miles long. • Use the L 1 distance metric • Demand density is 5 units per mile for the first 300 miles, and last 300 miles, but 1 for the middle 400 miles. • What is the optimal location of two terminals? • Cost of travel is $1/mile/unit

Facility selection • Xij=1 if the demand from source i is assigned to location j, 0 otherwise • Cij=cost of assigning a unit of demand from source i to location j, i=1. . n, j=1. . m • di=demand from source I • K=number of facilities available for placement • Ij=1 if the facility is assigned to location j, 0 otherwise • Minimize total cost (TC)

Mathematical Formulation • Minimize TC=∑i∑j. Xij. Cijdi • Subject to: – Demand for each source must be assigned to at least one location: ∑j. Xij≥ 1 – Only K locations are to be selected, and only Xij variables assigning these demand to locations can be positive so: ∑i. Xij≤n. Ij for each j, and ∑j. Ij=K • Can be solved by integer programming

Complexities • Capacity constraints • Fixed Costs • Some locations cannot be served by some facilities • Continuous location availability – Single facility – Multiple facility • Determining the number of facilities required • Weights for different customers

Realities • Typically we don’t need to know with great precision where to locate a facility • It is an interplay of availability of land, the existing transportation network • Special deals • Reliability of travel times • Scale

Transportation Perspective • Access to mainline transportation routes that connect origins and destinations – Highways – Grades – Intersections • • Zoning rules Taxation Rent or acquisition cost Incentives

Warehouse or DC Transportation • Typically used for imports rather than exports • Handle primarily containers from the ports of Seattle and Tacoma • Also receive deliveries from domestic moves or land borders • Provide tax revenue and jobs