Key challenges in the value chain of container transport

Running head: CONTAINERIZATION
CONTAINERIZATION
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Executive summary
Intermodal freight transportation is a complex system to manage. It offers challenges at various
levels of the entire transit value chain. Some of its common issues are overcapacity of containers
and emptied containers. Emptied containers need to be reduced to boost up profitability for the
terminal operators. Intermodal transshipment serves customers by delivering their orders and
transporting valuable and less-valuable goods to the market. The entire infrastructure needs a
huge modification, especially along the sea-side value chains. Investment is needed on part of
people, technology and products to ensure reliable, safer and profitable deliveries of goods.

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Table of Contents
Introduction......................................................................................................................................3
Body.................................................................................................................................................3
Q (a):................................................................................................................................................3
Advantages and Disadvantages of Containerization...................................................................3
The Transport Methods................................................................................................................6
Q (b):................................................................................................................................................7
Key challenges in the value chain of container transport............................................................7
The port facilities infrastructure required for both hub and spoke system port facilities............9
For port facilities servicing inland consumers...........................................................................10
Conclusion.....................................................................................................................................10
References......................................................................................................................................12

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Introduction
Containerization is an organized system to support intermodal freight transport utilizing
intermodal containers of varied sizes and weights. The dimensions of containers in terms of its
size and weight come in a standardized format. Such containers are loaded, unloaded, stacked
and transported over long distances as per the business need. The transportation of the
intermodal can be organized through rail, air, water and land transports (Liu, Bai and Chen
2017). The report aims to detail concepts concerning intermodal freight transport.
Body
The section discusses Containerization in detail. The section has detailed talks on
advantages as well as disadvantages of Containerization. There is a discussion on the transport
methods generally used in the intermodal freight transport system. The challenges faced in the
value chain management of intermodal transportation are also being discussed.
Q (a):
Advantages and Disadvantages of Containerization
Below is the list of advantages of Containerization (Ko, Shabanpour and Mohammadian 2017):
Flexibility: Containerization provides flexibility to intermodal freight transportation.
Goods can be placed in the most suitable containers to save on spending. Ineffective handling of
containers such as in the form of partially loaded containers can be the waste of money to

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intermodal transport service providers. Therefore, each container to be used for carrying goods
such as manufactured goods or cars has a size type of code and a unique identification number.
Standardization: Containerization means standardizing the selection of containers
based on its parameters like size type code. Standardizing makes it easier to identify containers
to be placed in different modes of transport. If Containerization misses such an arrangement the
intermodal system can face many logistics problems such as delayed loading of containers,
inappropriate allocation of the labor force to move the containers or else. When containers are
stocked and loaded meeting the standardized policies operations will flow smoothly both inside
and outside of the country. The receiving party will have an idea of the labor force and
equipment to keep in place to handle the unloading of goods.
Lower transport costs: Due to the standardization of containers it becomes easier to
allocate goods to the most appropriate container. Goods loaded in containers fit their sizes and
hence, avoid over-loading and partially loaded situations to occur. Over-loading may lead to
driving imbalances whereas partially filled containers will result in unnecessary waste of money.
An appropriately loaded container can be around 20 times less expensive than partially-filled
containers. Standardized containers result in economies of scale at terminals as well as modes,
which were not possible through the unstandardized process of loading such as bulk-loading.
Security: The containers are securely locked with a specific mechanism. Since goods
loaded in containers are mostly unknown to unauthorized people or groups and also that these
are tightly locked, shipment reach to destination safely. Indeed, containers can only be unlocked
at the origin, at customs and the recipient party.

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Reduced delivery times: Transshipment operations have improved the delivery times.
The selection of the transport mode is done based on the demand urgency and location
suitability. Locations that are more accessible and economical through water than any other ways
are chosen for water-based shipment. On the other hand, heavy vehicles are preferred for
distances within a thousand or two kilometers. All is to say the transshipment has boosted the
delivery efficiency of the intermodal system.
Warehousing: The container itself acts as the warehouse for loaded goods. It enables
simpler and cheaper packaging of goods. The threat of product tempering or any other form of
loss has reduced with the intermodal transport system in place.
The disadvantages are (Coşar and Demir 2018):
Draft issues: Containers occupy a large space in the site for the storage purpose. It is due
to the fact several of intermodal terminals have been moved to the urban locations to avail larger
space and get closer to business destinations. Draft issues in port areas are common now due to
larger containerships in these areas.
Intensive capital needs: Container handling system and the entire infrastructure attract
huge spending. Equipment ranging from giant cranes, rail access, and warehousing facilities to
the inland road all require huge maintenance costs. Cranes and other pieces of equipment to be
used are all hugely costly. Besides, the growing trend to automate the system will add further
burden on the equipment handling expenses.

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Illicit trading: Containers are also misused. These are misused for transporting goods,
drugs and weapons resulting in illicit trading of these products. Also, illicit trading expands to
illegal immigration of people; however, it is rare in practice. Concerns were also being raised
regarding the usage of containers for terrorism. However, no documentation has yet emerged
related to the case.
Arrangement of containers: Containers are normally arranged in a complex way. A
complex arrangement of containers both inland and on the track creates a lot of problems.
Unorganized positioning of cranes incurs additional costs and consumes unnecessary time. The
level of the problem will increase with the size of the port. It means large ports will create more
problems concerning time management and the expenses.
Repositioning: Many of containers are to move empty. Both the loaded or emptied
containers of the same sizes occupy the same port area. Hence, the flow of empty containers is a
loss to the intermodal system.
Theft: Containers that can be opened forcefully are at risk to lose valuable goods.
Valuable goods loaded in such containers stay in a state of vulnerability between a certain
terminal and final destination.
The Transport Methods
Several transport methods are used for intermodal freight movement. One of the methods
is Ocean. Due to many reasons such as the cost of freight movement and size or volume of

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Goods Sea is the most preferred of all transport modes. Ocean freight though is less expensive as
compared to other freight modes however takes a longer time. The transit time is way longer
than consumed for air, land and rail movement of goods. Freight movement through ocean
transport is suitable for a bulk volume of goods to be transported with long lead times. Ocean
movement is the friendliest of all transport methods. Ocean movement has a wider expansion of
the transport network. Airfreight is suitable for markets, which need a quick supply of shipment.
Automotive and retail industries do use air transport several times. Key benefits of this freight
system are quick transit, reliable movement of goods, less cargo handling, fewer documentation
needs, and increased security of the shipment. Rail transit apart from ocean transit has a large
expansion worldwide. Some of the key benefits of rail transit include reliable schedules and
transit times, efficient form of land transport, string safety record and effective in reducing
congestion from roads (Ertem, İşbilir and Arslan 2017). Road transportation is a widely used
transit system. Extensive expansion of road transport can be found in countries such as Africa,
Europe and North America. Road transit has several key benefits such as fast and scheduled
delivery, cost-effective mode of transport, flexible service, easy track of cargo, and usability in
relation to the door-to-door movement (Ertem, İşbilir and Arslan 2017).
Q (b):
Key challenges in the value chain of container transport
The container-shipping industry faced several management issues such as complexity,
low returns and overcapacity. With regard to the seaside container shipping, the fragmented

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nature of its value chain gets evident. These are brokers, owners, carriers, financiers and
builders. Each one of these segments is hugely fragmented as several companies compete for
overcapacity and market share. An example will help to understand the actual scenario. Across
the entire seaside value chain, many leading companies have only about 10 to 15% of the market
share. Besides, in each segment top companies have collectively 50% of the market share (Chen,
Jeevan and Cahoon 2016). This dangerous and complex arrangement of overcapacity and
fragmentation has resulted in a downward spiral. The downward spiral has impacted the earnings
noticeably. It has also resulted in reduced shareholder value (Chen, Jeevan and Cahoon 2016).
The value chain faces many other issues as well. Ship financing is one of the issues.
Financiers have stopped considerably financing for shipping facilities. Few large and old
European banks have started to withdraw support to the shipping facility following the ship
owners’ loan defaults and the demise of the KG system in Germany. However, the facility still
attracts financing by alternative sources such as from financial investors and Asian banks. Ship
ownership is another issue faced significantly by ocean transit. Many vessel owners can be found
to have struggled with low TC rates. This resulted in carriers’ redeliveries of chartered tonnage.
It produced the burden of idle-capacity in the increasingly noticeable amount on the shoulders of
owners (Panayides, Borch and Henk 2018). Besides, many mid-size carriers could not perform
well. The reasons for poor operational performance were the volatile and low freight rates. The
downward capacity pressure, which these carriers mainly face as a result of the overcapacity, has
resulted in carriers seeking to acquisitions of new, larger and efficient vessels. These carriers are
doing it to keep the costs under control (Panayides, Borch and Henk 2018).

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The port facilities infrastructure required for both hub and spoke system port facilities
The competition across hub ports has increased. Due to the hugely competitive nature of
the industry, the transshipment system is faced with issues such as the selection of hub ports. The
selection process has now been overly complicated with wider decision-making criteria to be
considered while intending to select a hub port. All these have resulted in the emergence of
diverse transshipment facilities. These are the hub, spokes and relay transshipment system.
Currently, the hub-and-spoke model is used to speed up deliveries as well as reduce costs.
Transports under this model collect shipments from the point of origin (the Spokes) and redirect
it towards a central processing facility (the Hub). Afterward, the shipment is either warehoused
or distributed as per the business needs. Several companies operating at large scale use many
hub-and-spoke systems to facilitate a much efficient transshipment system. One of the
advantages of using this model is it facilitates improved tracking of shipment. However, the
shipment has to travel over a large network of routes lacking effective connectivity between
them. To develop stronger networks comprising of cities, companies would require investing in
staffing activity. Besides, there would be needs for investing in the facility as well (Tuljak-Suban
2018). One hotbed of shipping activity will be needed by all-cargo companies. The hub-and-
spoke model needs spending on non-dedicated resources. Shipping companies need organized
and effective connectivity between organized routes. It is needed to make deliveries a sense of
making act. This can be done by ensuring that the overcapacity does not arise and the number of
empty planes is also reduced (Tuljak-Suban 2018).

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For port facilities servicing inland consumers
Container terminal operators have their focus shifted to inland services for beneficial
cargo owners (BCOs). They are doing it by investing more in deep-sea terminal infrastructure.
These terminals are investing to create an infrastructure that needs to establish more direct as
well as closer business terms and relationships with BCOs. The purpose is also to offer an
increasing range of value-added services outside the terminal gate. The numbers of linear
customers are decreasing. However, inland customers can be the potential market. Considering
this being important for container operations, there is a need to invest in people, products,
technologies and the facilities (Kotowska, Mańkowska and Pluciński 2018). Modern and highly
efficient facility and the system will be needed for facilitating smooth distribution from ports to
B2C markets, stocking, container stuffing, and consolidation. An improvement is also needed at
the terminal gate to ensure effective integration between the port infrastructure, and the value
chains of both importers and exporters. All these will be done to ensure the utmost productivity
and efficiency for generating benefits for liner customers (Kotowska, Mańkowska and Pluciński
2018). Undoubtedly, there will be problems related to these developments because of the
overcapacity issue being faced by few ports. Besides, the problems will become more critical due
to consolidation particularly on the linear side of a few ports.
Conclusion
Therefore, it can be said that intermodal freight transport is the growing needs of the
terminal operators, the worldwide governments and the people. There is a need to supply goods

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in shorter times with improved efficiency. Problems such as overcapacity and emptied shipment
need to be reduced for increased profits of terminal operators. Terminal operators should keep
their focus on addressing customer needs. It can be done by producing great products and
offering reliable deliveries in shorter times. All from business and governments to customers
should be benefitted from intermodal freight transportation.

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