Multimodal Transport and Logistics: Best Practices, Achieving Greater

Efficiency and Challenges.

By
Raffat Zaheer

Multimodal Transport had its inception in the late 1950s, when the American
trucker Malcolm MacLean, introduced the first steel container, capable of
transportation by sea, rail and road. Form this stage transport become multi-
dimensional and general cargo packed in steel containers began to move by
multimodal transport system (ie by more than two modes of transport with smooth
interchange between each mode).

In the twenty first century, Multimodal Transport has become the backbone of
international trade. It is vital for all trading nations to develop and foster
multimodal transport system in their respective countries with the objective of
reducing overall transport and handling costs to shippers and consignees.

During the last four decades containerization has made phenomenal progress.
Today approximately 95 percent of worldwide general cargo movement is in
containers. Containership of 12,000 TEUs are presently operating and 15,000 TEUs
are on the drawing board. Much of this development has come in the Americas,
Europe, South East Asia and Japan. China is racing ahead with its own
development and will soon catch up with the rest of the world. The huge capital
investment required for building large containerships and extensive infrastructure
in ports has precluded development and progress in developing countries.
Multimodal transport has grown in tandem with containerization because of it
being cost effective and more efficient than Unimodal Transport.

Multimodal transport, which provides the opportunity to manage the transport

chain more effectively through the integration of all modes of transport under a
single transport document, is helping countries respond to this growing demand for
just-in-time door-to-door services. Aided by the revolution in information
technology, multimodal transport operators in North America, Europe and a few
other countries have applied the principles of logistics to manage the flow of
products and information along the supply chain.

Whether seen from a legal point of view or from an operational perspective,

Multimodal Transport is generally considered as the most efficient way of handling
an international door to door transport operation. This is so because Multimodal
Transport allows to combine in one voyage the specific advantages of each mode,
such as the flexibility of road haulage, the larger capacity of railways and the lower
costs of water transport in the best possible fashion. Multimodal Transport also
offers the shipper the possibility to rely on a single counterpart, the multimodal
transport operator who is the architect of the entire journey and only responsible
party from pickup to delivery, rather than having to deal with each and every
modal specialist of the transport chain.

In multimodal transport, a variety of documents and information needs to be

exchanged between shippers, transport companies and consignees as well as
authorities, insurance companies, etc. The need for communication and amount of
information naturally increases with the number of partners involved in the
transport chain. The TCMS (Transport Chain Management System) system was
developed to make this easier. TCMS (Transport Chain Management System) is a
fully Web-based system to be used to control a door-to-door transport where several
transport modes are involved. TCMS automates the exchange of information and
documents needed for the organization of multimodal transport in such a way that
the user has no additional effort compared to uni-modal transport. Obstacles to
multimodal transport and logistics services which may exist can be grouped into (a)
infrastructure and technologies, (b) security and safety, (c) facilitation, (d) legal
aspects and (e) market access.

Transport logistics makes it possible to optimize flows of goods. Logistics is thus an

essential tool for meeting the challenges of growing mobility and competitiveness.
Logistics can optimize the conditions for the delivery of goods. It is a crucial means
of making transport more efficient, while limiting the effects of pollution and
congestion. Efficient logistical services should ensure a seamless flow of cargo. On
average, logistics accounts for 10-15% of the final cost of finished goods.

The five basic components of the Business Cycle are:

1. Buyer
2. Seller
3. Bank
4. Insurance
5. Logistics

Logistics involves:
1. Getting the right goods
2. To the right place
3. At the right time
4. At the right cost
5. In the right condition
6. And with due care and attention to the environment.

Logistics commonly includes:

1. Transport
2. Warehousing
3. Inventory/stock control
 4. Communications/information systems
5. Packaging
6. Manufacturing management.

The components of Supply Chain are:

1. Transport
2. Finance
3. Human relations
4. Information technology
5. Safety, health and environment
6. Education and training

Supply Chain Critical Success Factors:

1. Capability to drive an effective supply chain
2. Cycle time for supply chain processes
3. Cost of products and inventory management
4. Use of information technology
5. People development

The use of third –party logistics provider has grown steadily since their inception in
the 1980s and continues to grow. Many large organizations have either partially or
fully outsourced their logistics operations. However smaller organizations have been
slow to follow. Advantage of outsourcing logistics operations to a third-party
logistics provider is the opportunity to focus on core competency.

Perhaps the biggest advantage of using a third-party logistics is to allow your

organization to focus on its core competence, or what is does best. For example Nike
Shoes is great at marketing and selling their shoes. They do not own assets to
produce them, nor do they deliver the shoes to their retail locations. This allows
them to focus on product development, engineering and customer satisfaction.

The absence of international rules governing the successive carriage of goods

resulted in peculiar problems in the matter of carriers' responsibility and the
liability for loss of or damage to the goods occurring in the course of a multimodal
transport operation.

Multimodal Transport Law

1973: Commercial community created a set of MT rules under the ICC banner.

1980: Multimodal Transport Convention singed - but received little support.

1990: Commercial parties joined with UNCTAD and introduced the UNCTAD/ ICC
Rules for Multimodal Transport Documents, which replaced the 1973 Rules.
 - FIATA/ FBL
- BIMCO COMBIDOC is now commonly used in commercial practice

- Indian Law on Multimodal Transport

- United Nations Commission on International Trade Law (UNCITRAL)
Draft Convention (IMMTA Working Group)

1) Supply Chain Network Design

The design of supply chain network is critical in facilitating coordination among

suppliers, manufacturers, distribution centres, and customers. This component
provides tool kits for some of the following network design decisions:

a. Site location: This includes the numbers, locations, and capacities of facilities
(e.g., warehouses and distribution centres) required.

b. Service planning: This includes the type of service each facility provides. For
example, whether a facility should be used as a warehouse or a merge-in-transit
centre; where to hold inventory and the frequency of inventory replenishment to be
used, etc.

2) Multimodal Distribution Planning with Cross-docking

Cross-docking operations are essential in multimodal distribution planning. These
operations involve decisions in the coordination of the inbound and outbound flow,
the repackaging of cargoes, and the dispatching of vehicles.

In a multimodal distribution environment, one of the distribution planner’s

decisions is to select a set of transportation modes for each shipment in order to
minimize the cost of transportation while maximizing the efficiency of delivery. The
transportation modes may include:

a. Deep-Sea shipping (with vessels over 3000 twenty-foot equivalent units (TEU))
that serves inter-continental transportation.

b. Feeder shipping that serves regional transportation.

c. Barges that serve transportation between port and the adjacent river delta area.

d. Air transportation that includes international cargo services, couriers, and postal
services.

e. Drayage and shuttle services: Drayage refers to the container transportation

between terminals and consignees, while shuttle services refer to trucks between
hubs and major terminals.
f. Local deliveries that use small trucks and vans to do direct shipment.

The Middle East region is in the middle of exciting global, regional, and local
developments in terms of multimodal transport and logistics. Middle East has
unprecedented opportunities to capitalize on the unique strength of its favorable
geographic location.

The hub and spoke approach becomes more favorable as cargo volumes and vessel
sizes increase. Cargo from one originating point is loaded onto a vessel irrespective
of cargo destination and then transported to a central “hub”. In the hub, all freight
to different destination points is unloaded, segregated and consolidated, so that
freight for each destination points is reloaded on each separate feeder vessels. Hub
and spoke approach is the ideal logistics concept to achieve cost effective transport.

Current hubs in Europe are Rotterdam and Hamburg for sea freight and London,
Amsterdam, and Frankfurt air freight. Multimodal transport concept offers a
conversion from sea transport to air, road and rail transport. Such a service allows
the shipper to start with cost effective sea transport and to transfer the consignment
to air transport at a convenient hub. Middle East is a natural location to do the sea
to air transport conversion, for three reasons:

1. The Middle East is already the natural hub for refueling stopovers for the
Merchant Ships.
2. The region is easily accessible by sea and is increasingly becoming a hub of
the sea freight industry.
3. Transshipment if done in the Middle East, achieves attractive reductions in
transport time (approximately five to seven days) while still conserving the
cost effective sea transport rates for half of the total transport.

Strong and sophisticated multimodal transport and logistics sector will be essential
for the future economic development of countries in the Middle East.

Dubai has already made significant infrastructure investments in the integration of

its airport and seaport. With an annual volume of more than 100, 000 tones of
freight converted from sea to air, this operation proves the viability of the concept.

Its favorable geographic location provides the Middle East with a strong
opportunity to establish the leading transport and logistics hubs for the region
serving northern and middle Africa in the southwest, Pakistan in the east, and the
Caucasian Countries of the Commonwealth of Independent States (CIS).
Excellent global accessibility based on an extensive logistics infrastructure of
seaports, airports, and road networks is crucial for the establishment of such
regional centers.
Availability of efficient transport and logistics services is increasingly a key criterion
for direct investment, in addition to competitive cost factor and availability of
skilled human resources. Development of a global multimodal hubs, are limited in
number and require huge infrastructure investments. This can be seen from the
current infrastructure investment budgets of Singapore, the Chinese ports, and
Dubai. The global multimodal transport and logistics hub strategy must be built on
a preferred geographic location, and it requires huge investments in infrastructure.

The development of a global multimodal hub strategy requires a strong focus on the
development of a single mega-infrastructure incorporating a world class integrated
airport and port zone. Excellent connections to the neighboring regional markets,
development of road infrastructure, road and port infrastructures should be
focused to provide excellent connectivity to the regional hubs. The basic road,
seaport, and airport infrastructure development, free zones in the inner country,
close to the relevant consumption and production markets, are of significant
importance.