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Port Regionalization: Towards a New Phase in Port Development

Authors:
  • University of Antwerp / Ghent University / Antwerp Maritime Academy

Abstract and Figures

Inland distribution is becoming a very important dimension of the globalization / maritime transportation / freight distribution paradigm. Observed logistics integration and network orientation in the port and maritime industry have redefined the functional role of ports in value chains and have generated new patterns of freight distribution and new approaches to port hierarchy. Existing models on the spatial and functional evolution of ports and port systems only partially fit into the new freight distribution paradigm. This paper aims to add to existing literature by introducing a port regionalization phase in port and port system development. It is demonstrated that the regionalization phase and associated hinterland concepts demand new approaches to port governance and a functional focus that goes beyond the traditional port perimeter.
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Port Regionalization: Towards a New Phase in Port
Development1
Theo E. Notteboom
Institute of Transport & Maritime Management Antwerp (ITMMA), University of Antwerp,
Keizerstraat 64, 2000 Antwerp, Belgium. E-mail: theo.notteboom@.ua.ac.be
Jean-Paul Rodrigue
Department of Economics & Geography, Hofstra University, Hempstead, New York 11549, USA. E-
mail: Jean-paul.Rodrigue@Hofstra.edu
Abstract
Inland distribution is becoming a very important dimension of the globalization /
maritime transportation / freight distribution paradigm. Observed logistics integration
and network orientation in the port and maritime industry have redefined the
functional role of ports in value chains and have generated new patterns of freight
distribution and new approaches to port hierarchy. Existing models on the spatial and
functional evolution of ports and port systems only partially fit into the new freight
distribution paradigm. This paper aims to add to existing literature by introducing a
port regionalization phase in port and port system development. It is demonstrated
that the regionalization phase and associated hinterland concepts demand new
approaches to port governance and a functional focus that goes beyond the traditional
port perimeter.
1. Introduction
Inland distribution is becoming a very important dimension of the globalization /
maritime transportation / freight distribution paradigm. Structural changes in logistics
have generated new patterns of freight distribution and necessitated new approaches
to port hierarchy. Customers are calculating the total logistic cost of transporting
containerized goods, implying that current efficiency improvements in logistics,
namely for container transportation, are derived for a large part from inland
distribution. The development of global supply chains increased the pressure on the
maritime haul, on port operations, and last but not least on inland freight distribution.
Inland accessibility as such has become a cornerstone in port competitiveness
(CEMT, 2001). It thus appears that the battle over port forelands will be decided over
the hinterland, a segment of the distribution chain over which port players and port
authorities could play a more significant role.
This contribution provides a conceptual approach to porthinterland
relationships in a changing market environment. The paper aims to discuss and extend
existing models on the spatial and functional development of individual port terminals
and larger port terminal systems. A ‗regionalization‘ phase in port and port system
development is introduced and further substantiated. The paper furthermore elaborates
on governance issues linked to the regionalization phase and the development of
sustainable hinterland concepts that add to a port‘s competitive position.
2. Port terminals and inland freight distribution
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2.1. Port development
One of the most widely acknowledged conceptual perspectives on port development
is the Anyport model developed by Bird (1980) describing how port infrastructures
evolve in time and space. Starting from the initial port site with small lateral quays
adjacent to the town centre, port expansion is the product of evolving maritime
technologies and improvements in cargo handling. This is also marked by changing
spatial relationships between the port and the urban core, as docks are built further
away from the central business district. In the later stages, increased specialization of
cargo handling, growing sizes of ships, and ever increasing demands for space for
cargo-handling and storage results in port activity being concentrated at sites far
removed from the oldest facilities. In turn, original port sites, commonly located
adjacent to downtown areas, became obsolete and were abandoned. Numerous
reconversion opportunities of port facilities to other uses (waterfront parks, housing
and commercial developments) were created.
Three major steps can be identified in the port development process identified
by Anyport (Figure 1): setting, expansion and specialization. The three phases depict
well port development processes, especially in large traditional ports. The model
remains a valid explanation of port development. However, the model has some
weaknesses in view of explaining contemporary port development.
Setting
Expansion
Specialization
Regionalization
Level of functional integration
City
Port
1
2
3
4
General Cargo
Bulk Cargo
Containerized
Cargo
Urban Area
Reconversion
Freight
Distribution
Center
Freight Corridor
Figure 1 The Evolution of a Port
First of all, it does not explain the recent rise of seaport terminals that
primarily act as transshipment hubs in extensive maritime hub-and-spoke and
collection and distribution networks. Increased cargo availability has triggered
changes in vessel size, liner service schedules and in the structure of liner shipping.
Carriers and alliances have reshaped their liner shipping networks through the
introduction of new types of end-to-end services, round-the-world services and
pendulum services, especially on the main east-west trade lanes. As a result, a new
breed of terminals has emerged along the east-west shipping lanes at unlikely places
far away from the immediate hinterland that historically guided port selection. These
sites have been selected to serve continents and for transshipping at the crossing
points of trade lanes. They rely heavily, sometimes completely, on traffic flows that
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are distantly generated by the interaction of widely separated places and stimulated by
the port‘s en route location or intermediacy. The model of Bird does not provide a
base to explain the emergence of hub terminals in ‗offshore‘ or island locations with
limited or no local hinterlands.
Secondly, the Bird model does not include the inland dimension as a driving
factor in port development dynamics. This paper proposes a new phase of port
development, with stronger links with their hinterland, but also of intermediary /
transshipment ports, with stronger links with their foreland. Although these two
functions are not mutually exclusive, it appears that due to geographical
considerations, such as proximity and intermediacy to production and consumption,
ports are specializing in one function. Regionalization expands the hinterland reach of
the port through a number of market strategies and policies linking it more closely to
inland freight distribution centers (figure 1). The phase of regionalization brings the
perspective of port development to a higher geographical scale, i.e. beyond the port
perimeter. This point will be substantiated further is this paper.
2.2. Port terminal systems and port regionalization
The phase of port regionalization not only expands the Anyport model of Bird. It also
extends the existing literature on the spatial development of seaport systems2 in
relation to maritime and hinterland networks. The model of Taaffe et al (1963)
suggests an increasing level of port concentration as certain hinterland routes develop
to a greater extent than others in association with the increased importance of
particular urban centers. The geographical system would evolve from an initial pattern
of scattered, poorly connected ports along the coastline to a main network consisting
of corridors between gateway ports and major hinterland centers. The models of
Barke (1956) and Hayuth (1981) are quite similar, though they have introduced a
process of port system deconcentration. Meanwhile, some authors have introduced
modifications to the above models in order to reflect the uniqueness of some port
regions (see Wang, 1998). Empirical research has demonstrated that some port
systems and port ranges are getting more spatially concentrated while others are
evolving to a more evenly distributed system (see Kuby and Reid, 1992; Notteboom,
1997; McCalla, 1999; Hayuth, 1988; Lago, Malchow and Kanafani, 1999).
Similarly to the Bird model, the models on port system development up to
now (a) did not explain the recent rise of new hub terminals and (b) did not
incorporate inland freight distribution centers and terminals as active nodes in shaping
load centre development. This paper proposes a revised model on port system
development founded on two extensions.
The first extension encompasses the explicit integration of ‗offshore‘ hubs on
island location or locations without a significant local hinterland. Examples are
plentiful: Freeport (Bahamas), Salalah (Oman), Tanjung Pelepas (Malaysia) and Gioia
Tauro, Algeciras, Malta, Taranto and Cagliari in the Mediterranean to name but a few.
There are many factors behind the emergence of offshore hubs. They tend to have
greater depth since they were built recently in view to accommodate modern
containership drafts, placing them at a technical advantage. In addition, their sites
often have land for future expansion, labor costs tend to be lower (no unions), limited
inland investments are required since most of the cargo is transshipped, and terminals
are owned, in whole or in part, by carriers which are efficiently using these facilities
(TRi Maritime Research Group, 2003). In an initial phase these terminals solely focus
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on accommodating transshipment flows. As the transshipment business remains a
highly volatile business, offshore hubs might sooner or later show ambition to
develop services that add value to the cargo instead of simply moving boxes between
vessels. These ambitions could trigger the creation of logistics zones within or in the
vicinity of the port area, in many cases connected to the status of Free Trade Zone.
The insertion of offshore hubs does not make the mainland load centers redundant.
The terminals in the port system all have their role to play within the rich blend of
liner service networks. In referring to the Asian hub/feeder restructuring, Robinson
(1998) argues that a system of hub ports as main articulation points between mainline
and feeder nets is being replaced by a hierarchical set of networks reflecting differing
cost/efficiency levels in the market. High-order service networks will have fewer
ports of call and bigger vessels than lower order networks. Increasing volumes as such
can lead to an increasing segmentation in liner service networks and a hierarchy in
hubs (both ‗offshore‘ and ‗mainland‘). Not all port systems feature ‗offshore‘ hub
development. In the US, many impediments in American shipping regulations
gravitating around the Jones Act have favored a process of port system development
with limited (feeder) services between US ports and the absence of US-based
transshipment hubs (Freeport in the Caribbean to a limited extent takes up this role).
Instead, the US port systems at the east and west coast are characterized by a strong
inland orientation supported by extensive double-stack rail services, local and long-
distance trucking and limited barging.
Phase 1: Scattered ports Phase 2: Penetration and hinterland capture
Phase 3: Interconnection & concentration Phase 4: Centralization
Phase 5: Decentralization and insertion offshorehub Phase 6: Regionalization
Load center Interior centre Regional load centre network
Freight corridor
LAND
SEA
Deepsea liner services
Shortsea/feeder services
Phase 1: Scattered ports Phase 2: Penetration and hinterland capture
Phase 3: Interconnection & concentration Phase 4: Centralization
Phase 5: Decentralization and insertion offshorehub Phase 6: Regionalization
Load center Interior centre Regional load centre network
Freight corridor
LAND
SEA
Deepsea liner services
Shortsea/feeder services
Figure 2 The Spatial Development of a Port System
The second extension relates to the incorporation of inland freight distribution centers
and terminals as active nodes in shaping load centre development. The port
regionalization phase adds to the models of Hayuth and Barke, and is characterized by
strong functional interdependency and even joint development of a specific load
centre and (selected) multimodal logistics platforms in its hinterland, ultimately
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leading to the formation of a ‗regional load centre network‘ (phase 6 in figure 2).
Many factors favor the emergence of this phase, namely:
Local constraints. Ports, especially large gateways, are facing a wide array of
local constraints that impair their growth and efficiency. The lack of available
land for expansion is among one of the most acute problem, an issue exacerbated
by the deepwater requirements for handling larger ships. Increased port traffic
may also lead to diseconomies as local road and rail systems are heavily burdened.
Environmental constraints and local opposition to port development are also of
significance. Port regionalization thus enables to partially circumscribe local
constraints by externalizing them.
Global changes. Global production and consumption have substantially changed
distribution with the emergence of regional production systems as well as large
consumption markets. No single locality can service efficiently the distribution
requirements of such a complex web of activities. For instance, globally integrated
Free Trade Zones have emerged near many load centers, but seeing a FTZ as a
functionally integrated entity may be misleading as each activity has its own
supply chain. Port regionalization thus permits the development of a distribution
network that corresponds more closely to fragmented production and consumption
systems.
In this new development phase the port system consequently adapts to the imperatives
of distribution systems and global production networks while mitigating local
constraints.
3. Substantiating the regionalization phase
3.1. Port regionalization and logistics integration
The transition towards the port regionalization phase is a gradual and market-driven
process imposed on ports that mirrors the increased focus of market players on
logistics integration. International supply chains have become complex and logistics
models evolve continuously as a result of influences and factors such as globalization
and expansion into new markets, mass customization in response to product and
market segmentation, lean manufacturing practices and associated shifts in costs and
time dependent distribution strategies (Hesse and Rodrigue, 2004). Customers‘ need
for a wider array of global services and for truly integrated services and capabilities
(design, build and operate) triggered integrated logistics strategies (Christopher, 1992;
McKinnon, 2001) and a shift from transportation-based 3PLs (Third Party Logistics)
to warehousing and distribution providers and at the same time opened the market to
innovative forms of non-asset related logistics service provision, that is 4PL (Fourth
Party Logistics). Intensified competition at the supply side creates pressures on cost
management and on margins. The evolutions in supply chains and logistics models
urge market players such as shipping lines, stevedoring companies, inland transport
operators and forwarders to re-think their role in the logistics process and poses great
challenges to the role of ports as functional nodes in logistics networks. The tendency
towards logistics integration in the port and maritime industry and the impact of
changes in logistics on the functional role of ports in value chains are well
documented in recent literature. Robinson (1992) places the role of seaports within a
new paradigm of ports as elements in value-driven chain systems. Notteboom and
Winkelmans (2002) and Heaver et al (2001) primarily discussed logistics integration
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and the changing role of port authorities in the new logistic-restructured environment,
while Martin and Thomas (2001) addressed structural changes in the container
terminal community.
The development of the logistics industry has enabled many freight forwarders
to take control of larger segments of the supply chain. The level of functional
integration of land distribution is increasing rapidly. Many distribution functions that
used to be separated are now controlled by a single entity. In a conventional situation,
the majority of distribution activities were performed by different entities ranging
from maritime shipping lines, shipping and custom agents, freight forwarders and rail
and trucking companies. Regulations were often preventing multimodal ownership,
leaving the system fragmented. The shift from one segment to the other was
characterized by additional costs and delays either administrative or physical (namely
intermodal). With an increasing level of functional integration many intermediate
steps in the transport chain have been removed. Mergers and acquisitions have
permitted the emergence of large logistics operators that control many segments of the
supply chain (megacarriers). In turn, this has supported the development of economies
of scale in distribution. Technology also has played a particular role in this process
namely in terms of IT (control of the process) and intermodal integration (control of
the flows).
In the regionalization phase it is increasingly being acknowledged that land
transport forms an important target for reducing logistics costs. Regionalization as
such provides a strategic answer to the imperatives of the inland distribution segment
of the supply chain in terms of improving its efficiency, enhancing logistics
integration and reducing distribution costs. Globally, inland access costs account for
18% of the total logistics costs, and could be reduced by one third with appropriate
regionalization strategies (Stopford, 2002). On the crucial China-US trade link,
bringing a container from inland China to a gateway port such as Shanghai alone
accounts for more than 60% of the total transport costs (Carruthers and Bajpai, 2002).
Inland container logistics thus constitutes an important field of action.
The liner shipping industry is a prime example of an increased focus on
logistics integration (see Konings, 1993; Baird and Lindsay, 1996; Graham, 1998;
Cariou, 2001; Evangelista and Morvillo, 1998; Heaver, 2002; Notteboom, 2004;
Notteboom and Rodrigue, 2008). More economical ships and alliance co-operation
have lowered ship system costs, but at the same time intermodal costs share an
increasing part of the total cost. The portion of inland costs in the total costs of
container shipping would range from 40% to 80%. Many shipping lines therefore
consider inland logistics as the most vital area still left to cut costs. Some shipping
lines such as Maersk Sealand have gone rather far in door-to-door services and
integrated logistic packages (that is Maersk Logistics), managing the container
terminal operation (that is APM Terminals with a network of deepsea terminals that
has been opened to third users as well) and inland transport (for example European
Rail Shuttle in joint venture with P&O Nedlloyd) and bypassing the freight forwarder
by developing direct relationships with the shipper. Other shipping lines stick to the
shipping business and try to enhance network integration through structural or ad hoc
co-ordination with independent inland transport operators and logistics service
providers. A last group of shipping lines combines a strategy of selective investments
in key supporting activities (for example agency services or distribution centers) with
sub-contracting of less critical services. Shipping lines generally do not own inland
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transport equipment. Instead they attempt to use trustworthy independent inland
operators‘ services on a (long-term) contract base. The formation of global alliances
has taken inter-carrier co-operation to new heights, with members sharing inland
logistics information, techniques and resources as well as negotiating collectively
with suppliers (terminals, rail operators, feeders, barge operators, etc.). Lines that are
successful in achieving cost gains from smarter management of inland container
logistics can secure an important cost savings advantage and deliver extra value to the
customers. Moreover, because this is difficult to achieve, it is likely to be a
sustainable way of differentiating business from rivals.
Logistics integration thus requires responses and the formulation of strategies
concerning inland freight circulation. The responses to these challenges go beyond the
traditional perspectives center on the port itself. Port regionalization thus represents
the next stage in port development (imposed on ports by market dynamics), where
efficiency is derived with higher levels of integration with inland freight distribution
systems. Containerization, intermodality and ICT enhance the spatial and functional
reconfiguration among logistics nodes. In discussing the functional development of
the port of Rotterdam in the Netherlands, Van Klink used the term ‗borderless
mainport‘ to describe the functional development from port city to port network (Van
Klink, 1995, 1997). Many ports are reaching a stage of regionalization in which
market forces and political influences gradually shape regional load centre networks
with varying degrees of formal linkages between the nodes of the observed networks.
3.2. Corridors and inland terminals as cornerstones in port regionalization
The corridor is the main paradigm of inland accessibility as it is through major axes
that port terminals gain access to inland distribution systems (Rodrigue, 2004; Van
Klink and Van Den Berg, 1998). Since loading/discharging operations form
fundamental components of intermodal transportation, regionalization relies in the
improvement of terminals activities along and at either side of the corridors. This
involves a higher level of integration with intermodal transport systems, namely with
on-dock rail transshipment facilities and the use of fluvial barges. The new function of
port terminals requires the elaboration of inland terminals to accommodate new port-
inland linkages.
The immense pressure on the collection and distribution networks caused by
changes in the hierarchy of port systems has always demanded and promoted the
development of inland terminals. Variously called inland container depot, inland
terminal or dry port the implementation of the concept has affected trade flows, the
routings between ports and hinterlands and some traditional port functions. With the
expanding hinterlands, economic and logistic reasons emerged that justify the
establishment of regional inland nodes that serve not only a local market, but a much
broader region. Inland terminals are established as part of a new concept in freight
distribution and the changing role of the ocean carrier and other market players in the
entire transport journey. The development of rail hubs and barge terminal networks in
the hinterland is aimed at contributing to a modal shift from road transport to rail and
barge and as such enhances the regionalization phase in port and port system
dynamics. Inland terminals might transfer a part of the collection and distribution
function inland away from the ports, thus preventing a further overcrowding of
limited seaport areas.
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Core of the service area
Middle section of the service area
Outer section of the service area
Maritime load centre
Inland terminal
Continuous hinterland Port A
Continuous hinterland
Port B
Discontinuous
hinterland Port A
Discontinuous
hinterland Port B
'Island' formation
Port A
Port B
Figure 3 Intruding the natural hinterland of rival ports through the creation of corridor-based
‘islands’ in the distant hinterland
The regionalization phase and associated integrated hinterland networks promote the
formation of discontinuous hinterlands. The direct hinterland of a seaport is rather
continuous. The more distant hinterland however features a discontinuous nature (i.e.
the density of hinterland destinations/origins of port cargo is lower), as a result of the
structuring effect of transport corridors and logistics nodes. The service areas of a
container load centre by rail and barge takes the form of sets of overlapping service
areas of individual inland terminals. The size of each of the inland service areas
depends on the service frequency and the tariffs of intermodal shuttle services by rail
and or barge, the extent to which the inland terminal acts as a gateway and the
efficiency and price of pre- and endhaul by truck. By developing strong functional
links with particular inland terminals a port might intrude in the natural hinterland of
competing ports. ‗Islands‘ in the distant hinterland are created in which the load
centre achieves a comparative cost and service advantage vis-à-vis rival seaports (see
figure 3)3. This observation increases competition among ports of the same port
system.
Inland terminals fulfill multiple functions in the emerging regional load centre
networks.
First of all, inland terminals function as cargo bundling points in extensive
transportation networks. Large load centers typically generate enough critical mass to
install a number of direct intermodal shuttles to a limited number of destinations in
the hinterland. Where there are insufficient volumes for full trains or barges, bundling
concepts provide the answer and that is where inland hubs come in the picture.
Inland hub formation affects cargo concentration patterns in container port
systems. On the one hand, the formation of inland hubs enables smaller ports in the
port system to seek connection to the extensive hinterland networks of the large load
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centers, without having to rely directly on the large load centers. The use of inland
hubs by small and medium-sized ports of the same port cluster might enhance a
deconcentration tendency in the port system as described in the model of Hayuth. On
the other hand, inland terminals help load centre ports to preserve their attractiveness
and to fully exploit potential economies of scale. The corridors towards the inland
terminal network create the necessary margin for further growth of seaborne container
traffic. Inland terminals as such acquire an important satellite function with respect to
seaports, as they help to relieve seaport areas from potential congestion. Large load
centers can preserve their comparative advantages. This might enhance cargo
concentration in the port system.
Extreme forms of cargo bundling in seaports and inland centers could decrease
the efficiency of transport systems because shipments would significantly be delayed,
although having low transport costs. Hence, the current development and expansion
of intermodal transportation relies on the synchronization of different geographical
scales. But when the synchronization level increases, the sea-land network as a whole
becomes unstable (Rodrigue, 1999).
Secondly, most inland terminals have become cargo consolidation and
deconsolidation centers. Shippers use inland terminals in order to synchronize import
cargoes with the production lines. Inland terminals have also acquired an important
position with respect to export cargo, as many inland terminals revealed to be
excellent locations for the empty depot function. The function of an inland terminal as
empty depot can also ease one of the most difficult and wasteful problems of
container transportation, that is, the empty leg. Inland terminals as such have become
crucial in optimizing box logistics.
Finally, a large number of inland ports have become broader logistics zones,
as they not only have assumed a significant number of traditional port functions and
services, but also have attracted many related logistical services. These include for
instance low-end and high-end value-adding logistical services, distribution centers,
shipping agents, trucking companies, forwarders, container-repair facilities and
packing firms. Lower land costs and land availability may thus be suitable for some
logistics services that would otherwise be unable to afford high cost locations close to
main ports.
In the United States, two examples are particularly illustrative of the
emergence of inland terminals and their corridors. The first, regional in scale, is the
Virginia Inland Port, a facility located 350 kilometers from the main port and linked
with a daily rail service. The goal of this port regionalization project is clearly to
expand the hinterland by creating an island trying to capture freight flows from
trucking as well as from other ports (particularly Baltimore). The second, local in
scale, is the Alameda rail corridor where the ports of Los Angeles and Long Beach
developed an attempt to alleviate truck traffic by creating a peripheral satellite
terminal about 30 kilometers away. By diverting local truck flows away from the
main port facilities, economic and environmental benefits are expected.
3.3 Regionalization and Terminalization
Port regionalization and the associated creation of inland cargo centers enable to
partially circumscribe local constraints of seaports by externalizing them. Ports,
especially large gateways, are facing a wide array of local constraints that impair their
growth and efficiency. The lack of available land for expansion is among one of the
most acute problem, an issue exacerbated by the deepwater requirements for handling
larger ships. Increased port traffic may also lead to diseconomies as local road and rail
10
systems are heavily burdened. Environmental constraints and local opposition to port
development are also of significance.
With the development of inland terminals, such as satellite terminals, and
broader regional load centre networks, a new dimension is being added enhancing a
terminalization of supply chains. Initially, the term ―terminalization‖ was brought
forward to illustrate a new functional and operational reality of seaports where
terminal operators were playing a more important role (Olivier and Slack, 2006; Slack
2007). Logistics players are now making best use of the free dwell time available in
seaports terminals and inland terminals, thereby optimizing the terminal buffer
function. Dwell times are also flexible enabling the setting of extended distribution
centers that have a degree of synchronization with the gateway they are connected to.
For satellite terminals in the vicinity of port terminals the degree of synchronization is
high with a propensity of the extended distribution center to use dwell times at both
the gateway and the satellite terminal as buffer. For inland ports, the degree of
synchronization with the gateway tends to be low, but dwell times can be more
flexible, also enabling the setting of extended distribution centers. The more
important the customer in terms of volume, the higher its leverage with the terminal
operator concerning dwell time, which is coupled with the general lower level of
congestion of inland terminals. As a result transport terminals are achieving an
additional level of integration within supply chains that goes beyond their
conventional transshipment role.
3.4 The role of freight distribution centers in regionalization
The development of inland terminals is not sufficient by itself to ensure an efficient
port regionalization and inland distribution. Infrastructures servicing freight are
required at a location of convergence of inland freight, a function assumed by
distribution centers where vast quantities of freight are processed.
Manufacturers increasingly outsource logistics manipulations to their products
towards distribution centers located near consumer markets. As such, a large part of
the value creation in the supply chain is transferred to logistics service providers.
These activities are referred to as value added logistics services (VAL) and they imply
the integration of production and distribution parts of a supply chain. On top of low-
end VAL activities that add little value to the goods (e.g. labeling, insertion of
manuals, etc...), logistics service providers are further upgrading the functional role of
their logistics centers by developing high-end VAL activities. The latter might even
include postponed manufacturing activities like systems assembly, testing, software
installation, etc.. By doing so, logistics service providers take over an ever larger part
of the added value creation within the product chain. Freight distribution centers come
to the fore as turntables for low-end and high-end VAL services and develop a strong
orientation on short transit times. Logistics platforms incorporate additional functions
such as back-office activities, e.g. the management of goods and information flows,
inventory management, tracking and tracing of goods and the fulfillment of customs
and other formalities. While setting up their logistics platforms, logistics service
providers favor locations that combine a central location (i.e. proximity to the
consumers market) with an intermodal gateway function. Seaports and sites along
hinterland corridors typically meet these requirements.
The concept of logistics zones in the hinterland is particularly well-advanced
in Europe: e.g. ‗platformes logistiques‘ in France, the Güterverkehrszentren (GVZ) in
Germany, Interporti in Italy, Freight Villages in the UK and the Zonas de Actividades
Logisticas (ZAL) in Spain. Quite a number of logistics zones in the hinterland have
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become direct competitors of diversified seaports as far as the location of central
distribution facilities (e.g. EDC‘s in Europe) and VAL are concerned. Shortage of
industrial premises, land prices, congestion problems, the inland location of the
European markets and severe environmental restrictions are some of the well-known
arguments for companies not to locate in a seaport.
Corridor development enhances the polarization and zoning of logistics sites
in transport nodes (seaports and inland ports) and along the axes between seaports and
inland ports. Logistics poles exert a location pull on logistics sites by combining a
strong intermodal orientation with cluster advantages. This tendency is depicted in
figure 4. Conventional location theories support the tendency towards polarization
(e.g. the growth pole theory). Logistics companies frequently set up close to one
another, since they are attracted by the same location factors such as the proximity of
markets and the availability of intermodal transport and support facilities. The
geographical concentration of logistics companies in turn creates synergies and
economies of scale which make the chosen location even more attractive and further
encourages concentration of distribution companies in a particular area. Geographical
differences in labor costs, land costs, availability of land, level of congestion, the
location vis-à-vis the service markets, labor mentality and productivity and
government policy are among the many factors determining observed (de)polarization
of logistics sites (Buck Consultants, 1996, 1997; Colin, 1997; Ojala, 1997; Stabenau,
1997). Phase 4 in the model introduces the regionalization of port activity. The
concept of a ‗logistics pole‘ is the logistical equivalent of the concept ‗regional load
centre network‘, being that the latter is defined out of a cargo-flow perspective. A
logistics pole can only perform well if an efficient regional load centre network is in
place to guarantee the cargo linkages in and between logistics zones. In the
regionalization phase, the interaction between seaports and inland ports and terminals
leads to the development of a large logistics pole consisting of several logistics zones.
A virtuous cycle is created, producing scale effects, which ensures high productivity
from intermodal synchronisation and the compatibility of goods flows with the
logistics of shippers. Seaports are the central nodes driving the dynamics in a large
logistics pole. But at the same time seaports rely heavily on inland ports to preserve
their attractiveness.
The process described in figure 4 is highly dynamic. An unbalanced
development of inland terminals and corridors might simply move bottlenecks from
the load centre ports to corridors and inland centers. Given this constraint, companies
might consider relocating their logistics sites from the saturated areas to nearby
locations or even to locations far from the saturated logistics zone. Spatial relocation
patterns might change the relative importance and internal spatial configuration of
logistics poles.
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Figure 4 A spatial model on logistics sites in the hinterland
The trend towards spatial (de)concentration of logistics sites in many cases occurs
spontaneously as the result of a slow, market-driven process. But also national,
regional and/or local authorities try to direct this process by means of offering
financial incentives or by reserving land for future logistics development (Hesse,
2004).
4. Governance issues in the regionalization phase
The port itself is not the chief motivator for and instigator of regionalization.
Regionalization results from logistics decisions and subsequent actions of shippers
and third party logistics providers. This observation does however not imply ports
should act as passive players in the regionalization process. The regionalization phase
demands appropriate port governance structures to be in place as to face the
challenges posed by changing port-hinterland relationships. An important governance
question relates to the processes of stakeholder input and participation. The
governance framework4 should recognize the rights and potential contribution of the
various stakeholders in developing new approaches to port-hinterland issues. It should
also encourage active co-operation and participation of these stakeholders in creating
wealth (Brooks, 2001). This section explores some of the main governance issues port
authorities and other stakeholders face in the transition towards a regionalization
phase.
13
4.1. Changing the geographical scope of port governance
In the regionalization phase logistics chains have become the relevant scope of port
competition. The maritime package is an important element in order for freight to
flow through the port, but it is by no means the only one. Seaports are key
constituents of many supply chains and their pre-eminent role in international
distribution is unlikely to be challenged in the foreseeable future. Flexibility to adapt
quickly to changing opportunities and an integrated approach to logistics chains, for
example by adopting IT solutions, are key factors in achieving a high
competitiveness. The success of a port will depend on its capability to fit into the
networks that shape supply chains. In other words, the port community has to fully
benefit from synergies with other transport nodes and other players within the
networks of which they are part. This supports the development of broader regional
load centre networks, serving large logistics poles. The availability of powerful
information channels and systems and the capability of having a knowledge transfer
among companies are two of the main determinants for the success of logistics poles
and associated regional load centre networks.
4.2. The role of port authorities
The public sector has redefined its role in the port and shipping industries through
privatization and corporatization schemes (Goss, 1990; Baird, 2000). With the
reassessment of the role of the government much attention is now paid to governance
issues in ports and shipping (Wang and Olivier, 2004). The role of seaport authorities
in governing the regionalization phase will slightly differ according to the type of port
exploitation5.
In the tradition of the landlord port, it is tempting to presume that port
authorities should act as ‗facilitators‘ in transport chains. Port authorities should
constantly rethink and broaden their role as facilitator.
Initiative, co-operation and consultation constitute the key words underlying
proactive port governance. This means creating a platform in which port authorities
are working together with various stakeholders (carriers, shippers, transport operators,
labor and government bodies) to identify and address issues affecting logistics
performance. Port authorities are in an excellent position to play a leading role in such
initiatives as the pivotal location for international movements. Their interest concerns
generally the overall efficiency and the growth of trade rather than the performance of
particular sectors. The port authority can be a catalyst even when its direct impact on
cargo flows is limited.
In the regionalization phase port authorities can play an important role in
shaping regional load centre networks and logistics poles.
First of all, port authorities should promote an efficient intermodal system in
order to secure cargo under conditions of high competition. This includes for example
the involvement in the introduction of new shuttle train services to the hinterland,
together with the respective national railway companies, rail operators, terminal
operators, shipping companies and/or large shippers.
Secondly, the development of strategic relationships with other transport
nodes is another important role for port authorities. It is often assumed that only
private market players should be involved in setting up these types of cooperative
networks. The private port sector is indeed broadening the geographical scale of its
activities. Many of the stevedoring companies and forwarders have understood that
inland terminals can strengthen their position in the market. As a result they are
14
tightening the relationships with inland centers, for example, through investments in
inland terminals or distribution facilities in inland port areas.
Strategic co-operation in port networks normally is aimed at the tuning of
policies and the joint use of scarce resources. Major fields of possible co-operation
among (public) authorities of ports and inland centers are traffic management, site
issuing, hinterland connections and services, environmental protection, marketing and
research and development (R&D).
The implementation of regional load centre networking strategies can vary
from informal programs of co-ordination to advanced forms of strategic partnerships
through strategic alliances, (cross-)participation, joint-ventures or even mergers and
acquisitions. The form of co-ordination and co-operation between a port authority and
other transport nodes is of secondary importance. Indeed, the optimal form for
shaping the co-ordination and co-operation within a port network will largely depend
upon the institutional and legal status of the partners involved6. A well-balanced port
networking strategy does not imply a loss of port activity. It should enable a port
authority to develop new resources and capabilities in close co-operation with other
transport nodes and with mutual interests served. Sometimes very simple co-
ordination actions can substantially improve inland freight distribution, with benefits
for all parties involved. For example, regional authorities and market parties can
jointly take action to better streamline container flows and reduce empty hauls. One
solution could be to develop intermodal services between import-dominated locations
in the hinterland and export-dominated locations as to create a loop system resulting
in shorter distances and considerable savings in costs due to the reduction of empty
hauls. As mentioned earlier, a port networking strategy focused on inland terminals
might enable port authorities to tackle the problem of diseconomies of scale in the
port in the form of congestion, lack of space etc. The corridors towards the inland
terminal network in fact create the necessary margin for further growth of the sea-
borne container traffic. These inland terminals acquire an important satellite function
with respect to the seaports, as they help to relieve the seaport areas of potential
congestion (Slack, 1999).
4.3. Concerns in the regionalization phase
4.3.1. Over-optimism. The regionalization phase undoubtedly creates new
opportunities for ports and inland centers to develop integrated logistics concepts that
meet customers‘ aspirations in terms of supply chain management solutions.
Unfortunately, it often triggers a too optimistic attitude among planners in terms of
the future development potential of specific port and inland sites. Different locations
and load centre networks are vying for logistics sites and in pursuing this goal they
often overestimate future traffic potential. A lack of clear insights into market
dynamics could lead to wishful thinking by local governments and an overoptimistic
perspective on the logistics development potential of the regions concerned. This can
lead to overcapacity situations, redundancies and cutthroat competition between
incumbent sites (ports or logistics zones in the hinterland) and newcomers in the
market.
4.3.2. Slow start. Another point of concern is the time needed to develop a regional
load centre network. Even in case the benefits of port regionalization are quite
obvious, it often demands years of painstaking efforts of port authorities and market
15
players to gradually build the network. The case of New York is illustrative in this
respect as it went through all the phases in port development (Rodrigue, 2004). From
the initial setting of port activities on the Manhattan peninsula, the great majority of
modern port terminals are now on Staten Island and New Jersey. The port of New
York and the road infrastructure that serves it is under increasing pressure as cargo
throughput surges with the port handling more than 5.3 million TEU in 2007. The
need for port regionalization is thus particularly acute. The Port Authority of New
York New Jersey has developed an ambitious $60 million plan to siphon off some of
that traffic through a web of inland hubs connected to the mother port by barge and
rail (figure 5). The Port Inland Distribution Network (PIDN) plan would free up
valuable terminal space, ease mounting congestion and provide environmental
benefits. It would also provide reliable, scheduled service for containers no longer
subject to the saturated highway system and it should offer clear logistical benefits for
carrier, shipper and consignee. However, the first service Albany ExpressBarge, a
barge operation linking New York and New Jersey with Albany 150 miles to the north
is confronted with a slow start. The port authority outlined a range of operating
concessions and financial subsidies to help kick-start the new service but once the
subsidies ceased in February 2006 the barge service was halted7. A number of freight
clusters have already been established around major highways in the periphery of
metropolitan areas of the Boston-Washington corridor. Existing distribution activities
may take time to respond and adjust to this new inland freight distribution strategy as
trucking dominates regional inland distribution. The port authority hopes to establish
feeder port operations running within the range and expect to see a gradual freight
capture and modal shift. Camden (New Jersey) and Bridgeport (Connecticut) are also
in the frame. It will take time to get all these new services off the ground, to make
them self-sustaining and to change existing freight distribution practices. PIDN
should decrease the market share of road haulage in container land movements to and
from the port of NY/NJ from 85% to 57% in 2020, while the share of barges and rail
are expected to reach 20% and 23% respectively. In addition, many market factors are
favoring the extension and the consolidation of the PIDN in the medium run, namely
congestion and higher energy costs creating diseconomies in the trucking industry. In
such a context, port regionalization would be seen as a more cost effective alternative,
a stronger driving force than policies and incentives from the port authority. Still, this
regionalization is also been challenged by the regionalization of the port of Hampton
Roads which has grown substantially in recent years to reach a volume of 2.1 million
TEUs in 2007. The role of the Port Authority of New York and New Jersey in port
regionalization thus remains to be seen.
16
Pennsylvania
New York
Virginia
Maryland
New Jersey
Vermont
Massachusetts
New Hampshire
Connecticut
Delaware
West Virginia
Maine
Rhode Island
District of Columbia
North Carolina
Virginia Inland Port
Albany
Reading
Hanover
Worcester
Framingham
Springfield
Boston
Camden
Davisville
Bridgeport
New York / New Jersey
§
PIDN Barge Ports
Active
Study
Rail Service Status
Active
Study
PIDN Rail Hub
Active
Study
Barge Service Status
Active
Study
Suspended
050 100 150 20025
Kilometers
Figure 5 Port Inland Distribution Network
4.3.3. Port-related activities. Concerns also exist with respect to the spatial
distribution of logistics activities in the load centre network. As the hinterland
becomes a competitive location, the question remains as to which logistics activities
are truly port-related. The chances for distribution centers in the traditional processing
industries to locate in seaports may be good, because of the existence of large
industrial clusters in seaports. Next, seaports may be attractive alternative locations
for the relocation of distribution centers focusing on sea-sea operations. In the new
logistic market environment, the following logistics activities typically find a good
habitat in ports:
Logistics activities resulting in a considerable reduction in the transported volume;
Logistics activities involving big volumes of bulk cargoes, suitable for inland
navigation and rail;
Logistics activities directly related to companies which have a site in the port area;
Logistics activities related to cargo that needs flexible storage to create a buffer
(products subject to season dependent fluctuations or irregular supply);
Logistics activities with a high dependency on short-sea shipping.
Port areas typically possess a strong competitiveness for distribution centers in a
multiple import structure and as consolidation centers for export cargo. Many seaports
have responded by creating logistics parks inside the port area, often associated with a
status as Free Trade Zone. The concentration of logistics companies in dedicated
logistics parks offers more advantages than providing small and separated complexes.
However, emerging load centre networks mean that even port-related logistics
activities become footloose. Peripheral seaport-based logistics parks located just
outside the port area typically offer advantages with respect to congestion, costs of
land and labor. These peripheral parks are part of the greater seaport region and may
benefit from suppliers and other specialized inputs associated with the seaports. Port-
based logistics parks located outside the greater seaport area (sometimes at a distance
17
of more than a hundred kilometers from the seaport itself) but with a clear orientation
to one or more seaports with respect to the origins of the (containerized) cargo also
constitute a valid alternative to logistics parks in seaport areas. The footloose
character of port-related activities urges port authorities to stimulate the formation of
a load centre network. At present only strictly seaport-bound activities (i.e. bound to
the quays) are captive to seaport areas. Unfortunately, the mindset of many port
authorities is limited to these port-bound activities (i.e. the ship as focal point),
thereby leaving opportunities for the broader development of port-related logistics
activities in the framework of load centre networks unexplored (i.e. adding value to
the cargo as focal point).
4.3.4. The distribution of costs and benefits. The (re)distribution of wealth among the
players and nodes in the network is a major governance concern when developing
regional load centre networks. The external spill-over effects of ports are expanding
from the local port system towards a much larger international economic system. As
such, the regionalization phase enhances a situation where port benefits are likely to
‗leak‘ to users in inland locations. But unfortunately at the same time, many of the
negative externalities remain spatially concentrated in the seaports. For instance,
pollution from exhaust fumes by diesel engines now attracts a lot of attention in the
US, with ports being one of the most severely affected areas. This kind of situations
potentially brings about major socio-economic conflicts related to seaport
development and raises issues about optimal port location for a given region. For
example, the local community might wonder whether it is getting a fair input payback
for the scarce local resources used by ports. In the regionalization phase ports should
no longer be taxed on their direct economic effects generated within the port
perimeter, but on their contribution to wealth creation in the larger logistics pole and
economic system. This implies that an appropriate toolbox should be in place to make
the direct and indirect socio-economic payback of port activities (as part of a larger
system) more transparent both to port users and community groups.
4.3.5. Free riders. Another concern relates to the ―free rider‖ phenomenon in the
regionalization phase. Ports might develop strong ties with inland terminals in the
hope that this will bind cargo to the seaport. However, cargo flows follow the most
convenient route controlled by the freight forwarder, so a seaport cannot make cargo
generated by an inland terminal captive to the port, even if inland terminal and seaport
belong to the same load centre network. Investments of one load centre in setting up
inland terminals might thus have positive cargo impacts on adjacent rival load centers
that just benefit from the new inland terminals without having invested in them. Port
authorities are generally aware of the fact that cargo flows cannot be forced to follow
a specific route, and that free rider problems do exist. This might make port
authorities less eager to embark on direct formal strategic partnerships with a selected
number of inland terminals. Instead, port authorities typically favor forms of indirect
co-operation, for example through joint marketing and promotion, which are less
binding and require less financial means.
4.3.6. Politicization of and local rationality in the regionalization process.
Regionalization is in principle a market driven process, yet for the most part ports still
rely on governments to do the necessary investments in basic infrastructures, which
should ensure a good accessibility by land or by sea. As such the public sector plays a
key role in shaping the side constraints for what market players can achieve in the
18
area of regionalization. Port regionalization therefore often turns out to be a process
very heavily influenced by political imperatives rather than by the ‗invisible hand‘ of
an efficient market. Local rationality of port authorities and governments is a major
factor as well. Port expansion schemes of major gateway ports which are intended to
serve an entire economic region, tend not to be decided at the regional level, but at the
local (i.e. port, city, national) level. The local economic aspirations of officials and
politicians at cityport level promote the belief that existing ports will continue to be
optimal locations in the future, which in some cases may not be the case. Any
regionalization strategy developed by a port authority or local government has the
intention to improve the competitive position of the port, but this does not necessarily
imply that the final configuration of the related load centre network provides the most
optimal solution for serving the larger hinterland regions as a whole.
5. Conclusions
Regionalization represents a new phase in the development of port systems, which has
traditionally focused on the port itself. In this phase, inland distribution becomes of
foremost importance in port competition, favoring the emergence of transport
corridors and logistics poles. The port itself is not the chief motivator for and
instigator of regionalization. Regionalization results from logistics decisions and
subsequent actions of shippers and third party logistics providers. Port authorities are
invited to embrace and enhance the regionalization process in view of addressing
current port-related challenges, mainly congestion, growing costs, limited handling
capacity and the generation of additional traffic while being able to answer the
requirements of modern freight distribution. With a more efficient access to the
hinterland, mainly through modal shift, port competitiveness is thus increased. This
also leads to questions with respect to the limits of port regionalization in terms of
capacity and cost efficiency.
The strategic scope of port authorities should go beyond that of a traditional
facilitator. Port authorities can play an important role in the creation of core
competencies and economies of scope by an active engagement in the development of
inland freight distribution, information systems and intermodality. Direct and indirect
forms of networking with nodes and market players constitute probably the most
important role for port authorities in the regionalization phase, as gaining competitive
advantage will more and more become a matter of going beyond the port boundaries
both in terms of physical investments and managerial capabilities.
19
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1 This chapter is an update of: Notteboom, T. and J-P Rodrigue (2005) ―Port
Regionalization: Towards a New Phase in Port Development‖, Maritime Policy and
Management, Vol. 32, No. 3, pp. 297-313.
2 A port system is defined as a group of ports sharing a similar geographic
characteristic, e.g. coastline, bay and to some extent serving overlapping hinterland
regions.
3 The Virginia Inland Port is such an example of an hinterland island terminal linked
by rail to the port of Hampton Roads.
4 Corporate governance is ‗…the system by which business corporations are directed
and controlled. The corporate governance structure specifies the distribution of rights
and responsibilities among the different participants in the corporation, such as the
board, managers, shareholders and stakeholders, and spells out the rules and
22
procedures for making decisions on corporate affairs. By doing so, it also provides the
structure through which corporate objectives are set, and the means of obtaining those
objectives and monitoring performance‘.
5 An often used distinction is that between landlord port, tool port and service port,
see Port Reform Toolkit of the World Bank. The ‗landlord port‘ is most widespread:
the port authorities provide the necessary port infrastructure including quays, locks,
docks and yards. In most cases the national government gives financial support, e.g.
subsidies or loan guarantees. The private sector is responsible for cargo-handling and
port services, storage, warehousing and all investments in superstructure.
6 The institutional context often does not allow formal strategic partnerships with
authorities of inland ports. The shareholder structure of many inland ports reflects the
emphasis that still lies on the public tasks, that is, the stimulation of regional
economic development. The local focus still prevails thus leaving little room for
structural co-operation with other transport nodes.
7 The Port of Albany offered free storage of empty containers, while empties were
also returned free to New York. Given the existing imbalance in the trade, this last
element is critical in the start-up phase. The federal government has supplied
subsidies for congestion mitigation and air quality and to help pay for a mobile crane
in the Port of Albany. The Port Authority of New York / New Jersey was subsidizing
the service at the amount of $ 25 per box out of an assigned budget of $6 million,
which ran out in February 2006.
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... En wat wil de logistieke sector zelf? We baseren ons op wetenschappelijke literatuur over de ontwikkelingen in de havengerelateerde logistiek (Kuipers 1999;CPB, nEI en RIVM 2001;Van Klink 1995, 1998Mackloet 2004;Notteboom & Rodrigue 2005), op informatie van adviesbureaus (BCI 1996(BCI , 2006RBOI 2007) en over de trends die de haven en de sector zelf waarnemen (ndl.nl en logistiek.nl). ...
... Ports, which are found to have significant potential for contributing to sustainable development through industrial symbiosis (Mat et al., 2016;Cerceau et al., 2014;Merk, 2013), are conducive to the management and coordination of networked activities. Ports exhibit co-location of industrial activities, integration of public and private interests at port industrial areas, and facilitation of business development and networking, which make port a potent context for the evolution of collaborative business models (Gjerding and Kringelum, 2018;Verhoeven, 2010;Notteboom and Rodrigue, 2005). The facilitating role, which is most often conducted by port authorities, reflects that ports are platforms for cross-sectoral cooperation, and that port authorities are required to manage diverse strategic objectives for value creation and the achievement of sustainability (Kringelum, 2019;Lee and Lam, 2016;Suykens and Van de Voorde, 1998). ...
... With the rise of relational economic geography, studies on the use of complex network methods to study port and shipping networks, and the scales of research involve global, national, and local spatial scales increased. Notteboom and Rodrigue (2005) proposed the concept of port regionalisation and began to pay attention to the development of port backup service functions, such as inland logistics sites and dry ports (Nguyen and Notteboom, 2019). Since then, much attention has been paid to dry ports, such as deconstructing the nature of dry ports across four aspects: infrastructure, space, governance, and economic structure (Witte et al., 2017), analysing the periodic characteristics of the evolution of coastal ports to logistics hubs (Pettit and Beresford, 2009), and confirming the important substitution role of dry ports in the case of seaports being impacted (Gonzalez-Aregall and Bergqvist, 2019). ...
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... Based on studies by [8][9][10], the impacts of these facilities-especially dry ports-on the efficiency of multimodal transportation have become increasingly evident due to globalization and intensified trading. Nonetheless, research related to dry ports typically focuses on strategic decisions, for example determining the most cost-effective locations of dry ports [11][12][13] or assessing the strategic roles of dry ports in multimodal transportation networks from various players' perspectives [14][15][16][17][18], without taking into consideration other important operational factors, including changes in a dry port's infrastructure-and therefore its performance-as well as those of multimodal transportation environments over time [19]. ...
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... As globalization unfolded 22 , cities became interdependent; they no longer had a local economy and became part of a much more competitive and comprehensive market. In this context, Notteboom and Rodrigue (2005) encourage us to consider what they define as 'regionalization', a phase that occurred during the second half of the twentieth century, in which the ports depended on 'a network composed by different multimodal platforms over a large territory'. 23 Subsequently, the notion of 'logistics' arose around the 1970s 24 , and the functioning of the transportation network in the 1980s was based upon it. ...
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... Additionally, some of the issues, such as performance, dwelling time reliability, and capacity utilisation, are significant factors that limit the development of rail freight transport. The seaport sector in this country could not achieve the fourth phase of the seaport regionalisation model proposed by Notteboom and Rodrigue (2005). This situation prevents the seaports from achieving their real potential and retaining their attractiveness level all the time. ...
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The market environment in which ports operate has changed dramatically, and this continuous process of change raises questions on the role of port authorities. This paper discusses the impact of some structural changes in international trade, transport and shipping on strategic and operational issues in the framework of port management. The central hypothesis put forward is that a successful port (authority), like a successful actor, must be prepared to constantly adopt new roles in order to cope with the changing market environment. The content and strategic scope of these new roles are highlighted, especially with regard to the European container port system.