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Drivers for migration of an intermodal network hub from a port to an inland terminal

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This paper explores influences on a migration of hub status in an intermodal network from a port to an inland node by following the life cycle of an inland terminal development. The methodology is a longitudinal case study of the Swedish intermodal system over a period of 20 years, based on documentation, interviews and action research. We observe the changing roles of the Port of Gothenburg and the Falköping terminal at different time periods. These changes are then discussed and influences identified for this migration and new centralisation inland. The longitudinal approach allows a life cycle perspective which reveals the importance of initial public infrastructure development and then the operational importance of integration between shipper and intermodal transport and terminal provision in controlling the network. The integration of the inland terminal in regional logistics strategies was also found to be important in attracting port flows to be transported via the inland hub to be containerised.
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Drivers for migration of an intermodal network hub from a port to an inland terminal
Rickard Bergqvist1 and Jason Monios2
1 Department of Business Administration, School of Business, Economics and Law,
Gothenburg University. P.O. Box 610, SE 405 30 Gothenburg, Sweden. Email:
Rickard.Bergqvist@handels.gu.se
2 Kedge Business School, Domaine de Luminy, Rue Antoine Bourdelle, 13009 Marseille,
France. Email: jason.monios@kedgebs.com
This is the pre-published version of the text. The final published paper can be found at:
Bergqvist, R., Monios, J. (2021). Drivers for migration of an intermodal network hub from a
port to an inland terminal. Journal of Transport Geography. 19: 102981.
DOI: 10.1016/j.jtrangeo.2021.102981
Abstract
This paper explores influences on a migration of hub status in an intermodal network from a
port to an inland node by following the life cycle of an inland terminal development. The
methodology is a longitudinal case study of the Swedish intermodal system over a period of 20
years, based on documentation, interviews and action research. We observe the changing roles
of the Port of Gothenburg and the Falköping terminal at different time periods. These changes
are then discussed and influences identified for this migration and new centralisation inland.
The longitudinal approach allows a life cycle perspective which reveals the importance of
initial public infrastructure development and then the operational importance of integration
between shipper and intermodal transport and terminal provision in controlling the network.
The integration of the inland terminal in regional logistics strategies was also found to be
important in attracting port flows to be transported via the inland hub to be containerised.
Key words: intermodal terminal life cycle; seaport; intermodal transport; rail; hub; hinterland;
network; migration; longitudinal
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1. Introduction
The development of intermodal terminals has received significant attention in the literature,
particularly as regards their relationships with ports (Notteboom and Rodrigue, 2005; Roso et
al., 2009; Monios and Wilmsmeier, 2012a; Ng et al., 2013; Witte et al., 2019). In some cases
high volumes and long distances underpin successful intermodal services, but in more marginal
markets, it is necessary to obtain greater synergies by strategies such as integration between
the intermodal terminal and the rail service operator (Monios, 2015) or port actors (Monios and
Wilmsmeier, 2012a; Van den Berg et al., 2012; Veenstra et al., 2012), or attracting customers
by more sophisticated logistics strategies such as stock buffering (Rodrigue and Notteboom,
2009). What has received less attention is how these relationships change over time (Monios
and Bergqvist, 2016). A new intermodal terminal development may or may not have such
integrated relationships with port or rail actors at the start, but their ownership and operational
setup may evolve as a result of various influences or business strategies. The influences on this
evolution are difficult to capture by case studies performed at a single moment in time.
This paper explores influences on a migration of hub status in an intermodal network from
a port to an inland node as a result of the construction of a new inland terminal and its changing
operational strategies over time. The paper draws on three theoretical perspectives to explore
a longitudinal case study of an inland terminal development in Sweden and its evolution vis-à-
vis the country’s major port over a period of 20 years. The primary theoretical perspective
applied is to explore how the case represents an inland terminal moving through its life cycle
(Monios and Bergqvist, 2016) from development to growth to maturity, revealing different
influences and stakeholder roles, from a small city-developed terminal to a major player with
several services to the port and around the country, originally operated as a concession and
later sold to a large shipper who has developed from a customer into an intermodal operator.
Two related theories are used to supplement the intermodal terminal life cycle theory. The first
is how this terminal evolution also reflects its role (as well as other dry ports in the country) in
the port life cycle (Cullinane and Wilmsmeier, 2011), enabling the Port of Gothenburg to
follow a process of location splitting and extend its life cycle via a high modal split of around
60% of containers moving by rail, thus supporting the port’s throughout growth and operational
capacity. The second supplementary theoretical axis is the potential antagonism between the
port and inland node for locating logistics activities, revealing the split between port-centric or
inland logistics strategies (Monios et al., 2018). Therefore, while the inland terminal supports
the port in its own growth, it can also be viewed as a competitor if the port wishes to retain
logistics services such as containerisation near the port, while the inland terminal seeks to
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attract these exporters to fill their containers at the inland location for onward transport to the
port. Thus the spatial development of transport infrastructure is linked not only to transport
demand but also logistics strategies of both the transport providers and their shipper clients.
2. Literature review
2.1 Relationships between intermodal terminals and ports
Development of intermodal terminals and dry ports in the port hinterland can bring
advantages for both port and inland actors. Ports can reduce congestion, increase their handling
capacity and improve their environmental performance by sending containers by rail and barge
to inland terminals and also move related customs and processing activities as well as storage
to the inland location (Notteboom & Rodrigue, 2005; Roso et al., 2009; Ng and Gujar, 2009).
Inland actors can also support their local shippers while simultaneously obtaining
environmental benefits and reduction in road congestion, as intermodal terminals can enable
the bundling of traffic to allow intermodal operators to enter the market (Bergqvist, 2008).
As a result of the development of intermodal transport corridors linking ports and inland
intermodal terminals, over time some port-based logistics activities such as distribution centres
may migrate inland also, driven by logistics trends such as centralisation and rationalisation of
locations. In certain circumstances, however, ports may wish to retain or attract these activities,
usually if they have available land and are not facing congestion problems. Port-centric
logistics, whereby ports encourage logistics and distribution activities within or near the port,
enables ports not only to secure cargo but to earn additional revenue from these activities on
their own land (Mangan et al., 2008; Pettit & Beresford, 2009), subject to the port’s situation,
such as how much land is available and the quality of hinterland connections (Monios and
Wilmsmeier, 2012b). For imports, a port-centric strategy minimises the primary distribution
leg from the port to an inland-based DC while lengthening the secondary leg to final customers.
For exports, it suits a strategy whereby shippers bring non-containerised goods to the port for
containerisation and potentially other related activities at the same time. This is often the case
for exporters coming from further inland who do not want to pay the carrier to bring an empty
container all the way to their origin. The relative attractions and costs of locating such activities
at the port or at an inland location (potentially nearby an inland terminal) will depend on the
local situation, such as whether the inland location has cheaper land and labour costs than a
city port with high demand for space compared to an ex-industrial port with plenty of land
available (Monios et al., 2018). Thus there may be an antagonism between the port and inland
terminal vying for a role of logistics hub.
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The question of who should develop and operate inland terminals remains something of an
open question (Bergqvist et al., 2010). Many actors could take on this role, from port authorities
or terminal operators to rail operators to dedicated terminal operators and even other actors
such as shipping lines or real estate developers (Monios, 2015). A contrast has been identified
between Outside-In port-driven terminals and Inside-Out terminals generally developed by city
actors, sometimes in conjunction with rail operators (Wilmsmeier et al., 2011). In general, it
has been found that Outside-In developments are more successful because they have the port
involvement which guarantees traffic and close operational links (Monios and Wilmsmeier,
2012a). A more specific finding is that it tends to be the port terminals who are successful in
this process due to their control of the traffic, whereas port authority-driven actions tend to be
less successful and indeed less common (Monios and Wilmsmeier, 2012a; Magnan & van der
Horst, 2020). Inland-driven terminals may sometimes be seen as risky developments by city
authorities with wishful thinking not backed by market logic (Monios and Wilmsmeier, 2012a;
Rodrigue and Notteboom, 2012). Wiegmans et al. (2020) argue that such Inside-Out terminals
should attempt to overcome this “follower” status by more active strategies such as reducing
reliance on ports by developing traffic and perhaps cooperation with other inland terminals.
Bask et al. (2014) and Wiegmans et al. (2020) propose that terminal development may in
fact also be bi-directional, where a true partnership exists between the port and inland actor.
Raimbault et al. (2015) suggested, moreover, that both directions can be at play simultaneously.
Such relations between the actors go beyond simply the operational relationships (primarily
with transport providers and users) to include the policy and planning system and related
institutions that can influence a development path. Ng et al. (2013) showed how the
institutional structure of the terminal or dry port itself as well as the wider institutional setting
in which it is embedded can influence this evolution. Similarly, Raimbault (2019) identified
interactions between intermodal terminal governance and logistics dynamics in urban regions,
whereby the role of city and regional actors influence the evolution of inland terminal
developments as regards their integration with logistics providers and other geographical
scales. Raimbault et al. (2015) argued that a relational rather than functional logic is
appropriate, which reveals that the way actors use land and related resources as well as the role
of scale and network are essential components in understanding the spatial development of
transport infrastructure. While a great deal of focus in previous literature has been on the
terminal development process, the time perspective is crucial here (Bask et al., 2014; Monios
and Bergqvist, 2016), which would allow the opportunity to trace the evolution of these actors
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and networks. In order to frame this analysis, appropriate theoretical perspectives need to be
selected, which are introduced in the next section.
2.2 Theoretical perspectives: the intermodal terminal life cycle
The intermodal terminal life cycle (ITLC), developed by Monios and Bergqvist (2016),
takes account both of the original product life cycle model as well as previous applications to
seaports (Charlier, 1992; Cullinane and Wilmsmeier, 2011) and inland ports (Leitner and
Harrison, 2001). Regardless of the initial development process, as the market evolves over time
the terminal’s governance and its role in the market may change. It may become a more
attractive proposition and attract more flows and associated activities, its owner or operator
may change, it may become more aggressive in the market, and thus the commercial strategies
it adopts may change (Monios and Bergqvist, 2017). It may commence as a small Inside-Out
terminal seeking only small flows to support its local industry and to establish a single daily
shuttle to the port, but may later become a larger player competing with other terminals and
establishing services to other locations beyond the port.
The four phases of the ITLC are: planning, funding & development; finding an operator;
operations & governance; long-term or extension strategy. The fourth phase, which is the main
focus of this paper, is defined in a broader way than the simple maturity or decline phases in
the traditional product life cycle. The terminal’s evolution is not classified purely by growth or
decline of throughput, as indeed many intermodal terminals have long lives handling only
meagre traffic. Cognisant of the criticism of the product life cycle for its rather static nature
and inability to guide strategy, the ITLC aims to consider issues of stakeholders, power
relations, changes in ownership and market position. Thus the “extension strategy” phase could
include physical restructuring (e.g. terminal expansion), operational changes (e.g. redesign of
the site, change of traffic sources and different rail operators using the terminal) and
institutional redesigns (e.g. new business model, new ownership, integration between terminal
and other actors such as rail operators or seaport terminal operators or even shippers). The key
here is that a major overhaul of the product itself (the terminal business) has taken place.
While the intermodal terminal life cycle is the dominant theory used in this paper, it also to
some degrees mirrors and complements the port’s life cycle. The port life cycle also moves
through phases of growth and maturity and potential decline due to competition from other
ports and other factors (Charlier, 1992). The port’s use of dry ports to avoid congestion as
mentioned earlier can thus be viewed as a part of its life cycle. Cullinane and Wilmsmeier
(2011) argued that a port can extend its maturity phase and avoid a decline by using an inland
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terminal as a strategy of location splitting”. What is interesting is to observe the
complementarity between the separate life cycles of a port and inland terminal as they interact.
Simultaneously, the growth and maturity of a successful inland terminal lies in acting as a dry
port to a port that uses that terminals capacity to avoid its own potential decline and strengthen
its competitive position vis-à-vis other ports (Wilmsmeier and Monios, 2021). An unanswered
question is whether this process may reach a point where the success of the inland terminal
threatens to reduce commercial opportunities and revenue at the port and becomes in some
ways a competitor. This third theoretical perspective relates to the competition between port-
centric or inland logistics strategies (Monios et al., 2018).
Other elements of the port life cycle relate to its initial location that may need to change,
moving through phases of expansion and specialisation (Bird, 1963) that may lead to a
migration of at least some activities to a new location. With ports, this has been seen with the
move of many port terminals away from former city locations in search of more favourable
water access as well as land availability for both port operations and related logistics activities.
Drivers for this process include infrastructure and physical limitations, land availability, cost
differences, service connectivity and regulatory influences, while impediments include
proximity and connectivity of the original site to inland markets, non-tangible benefits of the
original (usually city) location, path dependence of the existing location and power and politics
in the port community (Notteboom, 2016). While these influences relate specifically to a
migration of port activities, they can also be considered in the context of an inland terminal’s
role vis-à-vis the port.
3. Methodology
Yin (2009) classified five types of case study suitable for a single case study design: critical,
extreme/unique, representative/typical, revelatory and longitudinal. The methodology selected
for this study is a longitudinal case study of the Swedish intermodal system, focusing on the
inland terminal development at Falköping, about 120 km from the Port of Gothenburg. The
early developments at this terminal attracted attention from scholars due to its involvement in
a European research project, but in fact its later evolution has proved more interesting. The
data on which the case study is based were derived from documentation, interviews and action
research over a 20-year period, thus allowing a unique perspective absent from most research
on intermodal terminals. Moreover, one of the authors was involved in the intermodal market
studies mentioned in the case study narrative, providing unique access to documents, cost data
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and the political and operational strategies surrounding the changes in governance at many
points during the life cycle.
In this case study, the changing roles of the Port of Gothenburg and the Falköping terminal
are observed at different time periods. These changes are then discussed and influences
identified for this migration and new centralisation inland. The longitudinal approach allows a
life cycle perspective which reveals the importance of initial public infrastructure development
and then the operational importance of integration between shipper and intermodal transport
and terminal provision in controlling the network.
4. Case study
4.1. Introduction to the Swedish intermodal system and the Falköping case
The Port of Gothenburg is the largest port in Sweden and Scandinavia. It handled 38.9
million tonnes and 772,000 TEU in 2019. About 60% of the containers handled at the port are
transported to/from the Swedish hinterland by rail, with 6 different rail operators providing rail
shuttles to 24 inland destinations. All the inland terminals are independent of the port which
does not have any shares or ownership in the terminals or rail shuttles. Only 3 inland terminals
handle around 40,000 TEU annually, Falköping being one of the biggest, while the others
handle around half this volume or less.
The first two phases of the life cycle of the Falköping terminal are described only briefly
because they have been documented elsewhere (Bergqvist, 2008; Bergqvist and Monios, 2016)
and the main focus of this paper is on the two later phases. Key data for the terminal since it
commenced operations (i.e. omitting the development phase) are presented in Table 1.
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Table 1. Key data for each phase of the Falköping terminal
Phase
2
3
4
Years
2008-2011
2011-2018
2018-present
Owner
Municipality
Municipality
Jula
Operator
AA-Bolagen (2008-10)
ISS (sub-contracted to
TBN) (2010-11)
TBN
Jula
Total size of site (m2)
20,000
20,000 (2011-14)
300,000 (2014-)
300,000
Warehousing (m2)
3,400
3,400 (2011-18)
11,000 (2018-)
16,000
Terminal handling
area (m2)
10,000
10,000 (2011-14)
40,000 (2014-)
55,000
Tracks (m)
2 x 175
1 x 350
2 x 175
1 x 350
1 x 630 (2014)
1 x 630 (2016)
2 x 175
1 x 350
2 x 630
2 x 630 (2020)
TEU storage capacity
200
200 (2011-14)
750 (2014-)
2,000
TEU annual
throughput
6,000 (2008)
0 (2009-)
10,000 (2014)
15,000 (2015)
20,000 (2018)
50,000 (2020)
Weekly trains to PoG
3 (2008-09)
0 (2009-)
5 (2013-)
6 (2020)
Weekly trains to other
locations
0
0
3 (Southern Germany)
4 (Duisburg)
Rail service operators
AA-Bolagen
Jula/Schenker (sub-
contracted to TM Rail)
Jula (sub-contracted to
Tågfrakt
Samskip (sub-contracted to
Hector Rail)
DB Schenker (sub-
contracted to Green Cargo)
4.2. Phase 1: Planning, funding & development (2000-2008)
Historically, there was an ongoing interest and several proposals by municipalities in the
Skaraborg region (about 120 km east of Gothenburg) to develop an intermodal road-rail
terminal. However, since the region only has a population of about 270,000 people, it was a
challenge to attract sufficient interest and funding from the national transport administration.
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In early 2000, the national transport administration supported Skaraborg’s involvement in a
research project to identify potential terminal locations and help the region to decide on a single
possible location for an intermodal terminal.
As the study progressed, results showed that, despite the short distance, an intermodal
transport service to the Port of Gothenburg could be cost-efficient with sufficient volumes. As
this potential was communicated by public actors in the region, private actors became more
interested. The research project also pointed to a favourable location in the municipality of
Falköping. However, by summer of 2006, very little progress had been made. Then, in
September the same year, Stora Enso, a large integrated paper, packaging, and forest product
company, announced their interest to build a 40,00050,000 m2 terminal for round timber in
Falköping, to be completed in 2007. This unlocked support by the national transport
administration to co-finance key infrastructure such as a marshalling yard and mainline
connection which could be shared by both the timber terminal and the proposed intermodal
terminal. However, the municipality could not secure sufficient funds to develop the planned
terminal without a level of guaranteed traffic, therefore operations commenced in 2008 at a
small existing site owned by the municipality just off the mainline with 2 tracks of 175m each
and 1 of 350m, requiring a lot of shunting. This site was originally developed for wagonload
traffic decades ago and has always been owned and controlled by the municipality.
4.3. Phase 2: Finding an operator (2008-2011)
The municipality ran a tender for a terminal operator and appointed AA-Bolagen in 2007.
This operator was a newly founded company that started their own intermodal transport service
to the Port of Gothenburg with three weekly departures. However, the coming year was
turbulent as a result of weak volumes following the financial crisis. In early 2009 the intermodal
transport service ceased operations and the terminal was without any intermodal traffic. During
this time the operator handled some timber trains at the site.
In 2010 the municipality wanted to develop intermodal traffic as they could see that other
terminals in Sweden were able to do so. Therefore, they ran another tender which was awarded
to ISS. As the site was so small, ISS initially sub-contracted the daily tasks to TBN, but as
traffic did not develop ISS decided to let TBN take it over in their own right in June 2011. At
this stage there was still no container train. This situation changed in 2011 as the municipality
of Falköping approached the company Jula (a large DIY company with 104 department stores
in 3 countries, 3,500 employees and 2019 company turnover of €0.9 billion with profits
reaching €57 million) to discuss potential intermodal transport services. This was the beginning
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of a new era for the intermodal terminal as volumes grew, operations become more complex
and eventually the governance structure also had to change.
4.4. Phase 3: Operations & governance (2011-2018)
While the terminal operator was now settled, the municipality wanted to restart the
intermodal service that had stopped running in 2009. In 2011 the municipality presented the
results of a new study to the management of Jula. The results illustrated both environmental
benefits and cost-saving potential at a level of around 10,000 TEU annually. The study also
highlighted that the container flow could be managed much more efficiently by using the
terminal in Falköping as a buffer of full containers as well as an empty container depot,
meaning that containers could be more easily distributed from the terminal in Falköping to
exporting companies in the region. At the time, empty containers were often shipped back to
the Port of Gothenburg and then repositioned to exporting companies. Jula was experiencing
an increasing cost for storage of full containers at the Port of Gothenburg and actually
repositioned containers to a nearby container depot in Gothenburg. In order to achieve the
identified potential, however, a substantial share of the container flows in the region had to be
coordinated and consolidated on the intermodal rail service.
It was not until 2012 that Jula’s volumes had increased to such a level that they could
potentially make up the critical mass for a profitable and stable intermodal transport service.
Schenker (Jula’s forwarder for many years) and Jula established a joint project team to realize
the idea in January 2013. After about one year of preparations and investigations, the
intermodal transport service was launched, with the first train running in September 2013. Jula
and Schenker operated an open-book agreement with a very high level of transparency and
both actors were involved in discussions covering aspects such as pricing, investments, service
quality and tendering processes. The traction was sub-contracted to a local operator and Jula
purchased the wagons themselves. As the shipper Jula became the train operator, they did not
need to pay a profit margin to the operator and could also cross-subsidise their own transport
costs with profit from other users of the service.
Jula operated their train for one year at the old terminal and it was only with the guaranteed
traffic from Jula that the municipality was finally able to invest in the long-envisaged dedicated
container terminal that would have longer tracks and benefit from the marshalling yard built
for the timber terminal. In order to enable a long-term investment by the municipality of
Falköping, Jula signed a separate agreement guaranteeing revenues of €250,000 for the
intermodal terminal for a period of five years, starting 1st January 2014. Annual variable
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terminal rent fees (about €4 per handled container) were also balanced against the guaranteed
revenue in case Jula left within the five-year period. This agreement was crucial in order for
the municipality to invest about €2.5 million in developing the new terminal, which was opened
in 2014 with an area of 22,000 m2 and 1 x 630m track. A second track was later added in 2016.
The old small terminal is still used for train parking and maintenance and occasionally handles
trains with construction equipment for rail infrastructure, etc.
For a few years the intermodal service was running well and providing regular volumes for
the terminal. During the port strike crisis in 2015/16, some traffic for the Gothenburg area
actually took the train to Falköping to avoid port congestion, then drove back into Gothenburg
(Gonzalez-Arregall and Bergqvist, 2019). By 2018/2019 the intermodal transport service
reached an annual volume of about 20,000 TEU. The market and volumes stabilised around
this level as by this time most of the regional import and export flows were already using the
service.
However, there were limitations with that setup that would eventually lead to a change in
governance and business model. First, Jula found it difficult to grow the service because the
companies not using the intermodal service mainly did not want to transfer to the intermodal
service if they were also required to use Schenker as their forwarder. Second, there was limited
success in attracting shipping lines to agree to empty container depots in Falköping which was
critical to develop possibilities for attracting export flows. Third, some frictions were becoming
evident between Jula and the terminal operator, as the operator was a small company who
needed to make revenues from terminal services, while Jula wanted to use the terminal to
support the rail service. Jula wanted more flexibility at the terminal in terms of opening hours
and storage in order to attract more flows, which would bring benefit both to Jula’s service and
to the operator through more throughput, but reaching agreement on pricing was not always
possible which increased tensions.
One example of these tensions is how since 2015 Jula was using longer and heavier vehicles
(LHVs trucks with two trailers hauling 2x 40ft containers - cf. Bergqvist and Monios, 2016)
to optimise their pre- and post-haulage road flows, but this required some flexibility at the
terminal in terms of longer opening hours and leaving some unloaded containers on spare
chassis ready for Jula’s haulier to pick up after hours. This change was successful but Jula
wanted more flexibility such as weekend opening but could not reach agreement with the
terminal operator. Another example is that using only one reach stacker saves money for the
terminal but if there is a problem it causes a large delay for the customers, but as there are no
performance penalties at the terminal, the operator is not incentivised to invest in a second
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reach stacker. So the terminal is profit maximising whereas the rail service operator is focused
on satisfying customers to attract more traffic. This is an example of why it is necessary to
integrate the terminal with the services in order to find a better fit and obtain those synergies,
and this led to a change in terminal ownership and operation which triggered a new phase of
the life cycle.
4.5. Phase 4: Extension strategy (2018-present)
The first big step in the new extension strategy was to take control of the terminal operations
as well as ownership. This was essential to enable full flexibility in service offering and price
discrimination in order to promote economies of scale and scope. However, it was not possible
for Jula to become the operator because of the strong contract between the municipality and
the operator. It would have been politically challenging for the municipality to initiate a
discussion for ending the concession contract ahead of time. So if Jula wanted to operate the
terminal it was easier to purchase it. But they were content to purchase it anyway because they
had ideas for site expansion and commercial development. It would be easier to pursue these
actions directly as owner.
The terminal and 250,000m2 of adjacent land was purchased at the beginning of 2018 at a
cost of 3 million. Even once Jula purchased the terminal, the concession agreement with TBN
as operator was still in force so they had to offer some compensation to end the concession
contract. This enabled Jula to start expanding the terminal with more tracks and space for
handling. At that time the terminal was 22,000 m2 with 2 x 630m tracks. Shortly after this
development, Jula was successful in attracting Samskip to switch their Duisburg-Gothenburg
service to Falköping in 2019. Even flows to/from the port must take the Jula service to connect
with the Duisburg service at Falköping. This setup enables Samskip to service the Swedish
hinterland while also maintaining access to the port. Thus with developments like this,
Falköping is beginning to become the hub rather than the Port of Gothenburg. The key point
here is that this connection would be hard to achieve if Jula were not the terminal operator as
it would result in high costs for handling since moving a container from the Samskip train to
the port train would have been charged as two handling fees. But as Jula is both terminal
operator and train operator, they are able to waive the second terminal handling fee for
switching containers between the two trains in order to obtain more volumes and economies of
scale on the container train. Connections to Europe through Samskip also create synergies with
Jula’s aim to attract services from northern Sweden and Norway, by which Falköping could
become an attractive node for splitting volumes for a European rail shuttle. The goal is that,
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instead of a European operator needing to service 2-3 different destinations, they can connect
with one service at Falköping.
The next step in the extension strategy was for Jula to take a bigger responsibility in the
selling and market control of the port train rather than leaving it to Schenker. Under a new
arrangement, Jula becomes a subcontractor to Schenker only for the customers and flows that
Schenker controls but Jula controls the train themselves and is more free in how they target
different customers as well as the pricing. This was essential to attract flows such as Samskip
and other regional flows for companies that did not want to change to Schenker as a new
forwarder.
Overall, this strategy has been successful as it quickly resulted in adding some more import
flows and customers. By mid-2020 the annual turnover of the Gothenburg container train had
increased to about 40,000 TEU annually, making it one of the largest container shuttles to and
from the Port of Gothenburg with an average of 6 departures per week. In September 2020 the
terminal expanded to 55,000m2 of handling and 4 x 630 meters rail tracks.
As a result of the volume increase and their ability to control the terminal operations, Jula
was also able to sign contracts with shipping lines for empty container deports. The first was
in 2019 and three more contracts were added in 2020 so the terminal now has contracts with
four of the biggest shipping lines in the world that call at the Port of Gothenburg regularly.
This development was a game changer for the site as no other inland terminal in Sweden has
been able to obtain these agreements from carriers. The agreement was partially enabled by the
marketing power from the container volumes provided by the Jula service to carriers as well as
the attraction of Jula’s offer of no storage fees for the carriers. The depot brings benefits to the
carriers (increases their catchment area, particularly for exporters, and they don’t have to pay
high charges to the port operator to store their containers) and the port terminal (they would
rather not use valuable terminal area to store and maintain empty containers). The key issue
here is that this strategy works because Jula is both terminal operator and transport provider.
They do not aim to earn money from the empty depot but to use it to support the intermodal
service, which occurred in several ways. It means that importers like Jula do not need to pay to
transport the empty back to the port and exporters do not need to pay to transport an empty
from the port but can pick it up at the Falköping terminal. Indeed the service can even earn
revenues if a carrier wants an empty to be transported to the port for their use.
This empty depot strategy has already been successful in attracting exporters to use the
terminal before the depot they could match about 10% of import and export containers,
whereas now that figure is closer to 80% of matched flows, i.e. full containers in both
14
directions, which increases the profitability of the service. Considering the industry structure
of Sweden, and goods suitable for containerisation, there are substantial export volumes in the
segments of paper, pulp and sawn timber. However, the scale of these volumes means that it
needs to arrive in bulk by train, handled with weather protection, stored temporarily and stuffed
into containers based on customer demand. This has traditionally been performed at the Port
of Gothenburg but with empty containers now available at Falköping, Jula is now planning the
development of a rail-connected warehouse to perform this task. The Port of Gothenburg
recently built a 20,000m2 site for containerising paper products but Falköping has space to
create a site twice that large. To create connectivity to and from northern parts of Sweden where
most of these segments and volumes are generated is Jula’s next goal. The development of the
services in the network is depicted in Figure 1, which shows in phase three the increased traffic
between the port and the terminal and the development process to capture traffic from
Germany, and in phase four the increased traffic from both inland Sweden and Germany and
the planned services to northern Sweden.
Figure 1. Simplified diagram of the role of the Falköping terminal in the spatial development
of the Swedish intermodal network over time
Note: figure not to scale, only a selection of terminals represented, dotted line indicates
service in development
15
The next step of the strategy will mean that the focus moves from regional to national
export flows which means that the warehousing and stuffing services and capacity will need to
be developed. There was 3,400m2 of warehousing at the original old site. At the new site, the
municipality developed 11,000m2 of warehousing up to 2018, and operator TBN leased them
for intermediate storage of cargo. Jula added an additional warehouse of 5,000m2 in 2020 and
they are now planning to develop up to 30,000m2 of cross-docking warehouse for
containerisation of export flows of paper products, pulp and timber. The aim is to have this in
place by 2022/2023. Parallel to this, the plan is to also to develop more logistics facilities on
the surrounding land owned by Jula that will further strengthen the intermodal terminal and its
connected transport services.
5. Discussion
5.1. Inland terminal and port life cycles: the role of integration and logistics strategies
Applying the ITLC reveals key changes in an intermodal terminal’s operations and
governance which is particularly relevant for Inside-Out terminals. While Outside-In port-
driven terminals are more likely to be well integrated in port container flows, Inside-Out
terminals aiming to support regional logistics need to be more proactive in making port shuttles
economically viable as well as attracting customers. As with many Inside-Out terminals, the
primary goal in the early years was merely to establish a reliable intermodal service with the
port. The municipality would even have been happy to hand over operations or possibly even
sell the terminal to the Port of Gothenburg (as is possibly the case with other similar terminals)
but the port was content not to have to run the terminals themselves. Thus the port benefited
from a developing rail network of 24 terminals around Sweden without having to actually run
anything themselves.
In terms of using inland terminals to maintain the maturity phase of the port life cycle, the
Port of Gothenburg has been successful in achieving an impressive rail modal share (around
60% of containers) via a large intermodal network without having to manage it directly. The
terminals and services support the port in managing its throughput and were particularly helpful
during the 2015/16 strike crisis when roads were congested. Although initially reluctant, the
shipping lines as well as the container terminal operator have benefited from the empty depot
at Falköping. The inland terminal is pursuing these strategies by marketing itself as a hub and
diverting some formerly direct port services to the port of Gothenburg. At the moment it is just
the Samskip train from Germany but in future it may be a handful of trains from, e.g. the north
of Sweden and perhaps eventually beyond. The routings of the inland rail network are not in
16
themselves of interest for the port authority, but they may have cause for concern if the inland
terminal is successful in attracting the related logistics activities of container stuffing away
from the recent purpose-built facilities developed by the port.
It was noted above that the port life cycle is also influenced by geographical factors that
may cause its initial location to be changed, not only by expansion and specialisation but even
a migration of at least some activities to a new location. Considering which of the drivers and
impediments identified by Notteboom (2016) applied to this case, certainly land availability
and cost differences for logistics services favoured the inland location. While it was not
necessary to move services to the inland location to improve service connectivity, the
commercial strategies of the Falköping terminal enabled it to insert itself into a hub role by
attracting new connections. In terms of impediments, obviously the inland terminal was closer
to inland markets which indeed enabled it to exploit this connection, particularly once it had
secured the empty depot. The port does enjoy path dependence as well as power and politics in
the port community, but these relate to the port authority, whereas the terminal operator and
carriers do not have any impediment to exploit synergies with the inland terminal to enable
better flow of containers.
This reveals the importance of logistics strategies in both the port and intermodal terminal
life cycle. Just as new port terminals were built away from their former urban locations, so
were large distribution nodes, with a focus on the optimal regional or national market
accessibility, and clustering and agglomeration strategies resulted in large multi-tenant
logistics platforms. Fewer, larger DCs and multi-tenant sites also provide the consolidation
necessary to support the growth of intermodal corridors therefore inland logistics goes hand in
hand with the growth of inland terminals as intermodal hubs which can compromise attempts
to develop port-centric logistics. While port authorities as land developers want to pursue port-
centric logistics, the question is whether port terminal operators and carriers favour that model
or prefer the inland focus. The successful terminal development at Falköping has been able to
work with these latter actors thus far.
Thus two key influences on the ITLC are highlighted here: integration and logistics. It is
well-known that vertical integration between terminal and either rail operator or port terminal
operator is frequently beneficial in order to establish successful intermodal services. However,
due to the fragmented intermodal market in Europe where vertical separation is the norm, it is
often difficult to achieve cost-effective services. In this case the first step was integration
between the rail service operator and the shipper which enabled cost savings to establish a
profitable service. Jula and Schenker then sought further synergies with the terminal but these
17
could not be achieved while the terminal had a separate operator running the terminal as a profit
centre. Many studies of intermodal terminal development do not get beyond this stage, focusing
purely on the costs of an intermodal service in which the terminal handling charge is assumed
as a given input. The value of the ITLC is to focus on the role of the operator and their
interactions and relationships with the other stakeholders, from owner to service providers to
logistics services and port actors. The use of logistics changes to further underpin the service
was seen in the use of LHVs to optimise the road haul, using the terminal as a buffer (which
required renegotiation of storage fees) and the use of empty depots to reduce empty
repositioning and storage charges. These logistics optimisations were not possible without
integration between terminal and service operations, for example the need to waive certain
revenues such as storage and double handling fees in order to attract the Samskip service.
These developments reflect the actor-network and relational perspectives proposed by
Raimbault et al. (2015) and the institutional perspectives of Ng et al. (2013) in inland terminal
development via-à-vis both port and inland actors. The role of the public actor at city level was
essential in the early phases, with only modest aims for a small terminal. Nevertheless, in order
to achieve this ambition, many years of working with public actors at all scales was necessary
to finance and build the connecting infrastructure and marshalling yard, and with private actors
to attract business and to arrange a deal guaranteeing a certain level of revenue before the new
terminal could be built. The role of the city as entrepreneur was also evident in the development
of adjacent warehousing and several years of networking with local and regional businesses,
and even at the European level, to attract interest to this location. As the terminal evolved, these
actor relationships developed further in innovative ways, arranging deals between the operator
and the main customer Jula to allow storage of containers and access after hours and with global
shipping lines to operate empty depots, something not one of the other 23 Swedish terminals
had obtained. Thus the terminal’s development path cannot be understood simply as the
functional development of transport infrastructure in response to a derived demand for
transport services, but rather as an interplay of relations that highlight structural and
institutional changes. The first innovation was the entrepreneurial role of the municipality
acting in the market, then the innovations of shipper Jula to become a transport provider, which
then opened up new operational synergies in running and pricing the services. Finally, the
evolution of the relational dynamics between city, terminal operator and shipper Jula extended
the business model to the point where Jula eventually became both owner and operator.
18
5.2. The extension strategy and avoiding moral hazard in terminal evolution
These key changes in terminal economics are the basis for the “extension strategyphase
of the ITLC, whereby the basic economics and operations of the terminal are changed in order
to work differently. It is not just about growing traffic and reaching maturity as measured in
traffic levels (as in the traditional product life cycle). In some cases, such as this one, the entire
business model of the terminal has been changed, and the terminal infrastructure itself has been
sold to a shipper. Selling off a terminal that had been developed over two decades with
substantial public investment could have been a controversial move, but the deep integration
of Jula in the intermodal operations and the enormous success made it a natural evolution. This
vertically integrated model whereby one company is at the same time the main shipper, the rail
operator, the terminal operator and the terminal owner provides many synergies lacking in most
intermodal chains.
Monios and Bergqvist (2016) discuss many reasons for retendering a concession contract
at the extension phase in order to enable a new life cycle for a terminal, such as the opportunity
to correct mistakes from the first concession, clarifying and ensuring open access provisions
and the fee structure, agreeing on the level of superstructure and technology provided for
existing and potential new customers and resolving issues of capacity planning and traffic
management. Any of these issues can arise as a result of a loose concession agreement that is
no longer fit for purpose. In this case, the extension strategy selected in order to resolve these
issues was to sell the terminal to the private shipper Jula, but one could imagine that it might
not have been necessary under different contractual conditions.
Throughout decades of changes in the port sector whereby services have been deregulated
and operations privatised through concession agreements, full privatisation of port terminals
by selling the site in its entirety remains the exception. Thus the sale of the Falköping terminal
to a private operator (albeit that they are a locally-based shipper rather than simply an operator)
could therefore be considered very unusual. Part of the reason for this sale was the difficulty in
the municipality extracting itself from the concession arrangement with the incumbent
operator. Thus the life cycle approach aims to make these issues clear from the beginning and
encourage owners and developers to establish more concrete concession contracts with clear
handover clauses, clear provisions on all (existing and potential) operational charges, while
also retaining room for ending the contract early according to certain conditions. Given the
small scale of intermodal terminals, when they are constructed and enter operations the
potential situation two decades in the future is rarely considered, and it is not uncommon for
19
early operational contracts to lead to such issues and misunderstandings later in the life cycle;
best practice in terminal concessions as found in the port sector has yet to be fully transferred
to the intermodal sector (Monios and Bergqvist, 2015). It is also not uncommon to have
conflicts between operators and users in cases where the operator’s role is influenced to some
degree by moral hazard, meaning that their business decisions are not entirely motivated by
commercial risk and reward decisions because their position is guaranteed (cf. Bergqvist and
Monios, 2014 for more analysis of the contractual situation between operators and users).
Considering the competitive strategies derived from the marketing literature by Monios and
Bergqvist (2017), it is clear that the evolution of this terminal has followed the more
entrepreneurial strategies at each phase of the life cycle, as opposed to the more standard
infrastructure development process of simply maintaining the infrastructure and harvesting the
traffic. As a result of the failed early shuttle and the need to find a new strategy, a “niche”
strategy was followed to develop the open-book Jula-Schenker service, then a “brand
expansion” strategy to further exploit this tailored service through customising the opening
hours and container unloading and storage process. Once the viewpoint between Jula and the
terminal operator diverged, there was a tension between the operator’s preferred “maintenance”
strategy and Jula’s desired “differentiation” strategy, which could ultimately only be resolved
through a new governance structure and business model for the terminal. The nuance that can
be obtained by examining an inland terminal via such lenses as the life cycle and marketing
strategy allows the identification of options that go beyond the traditional view of terminals as
homogeneous interchangeable assets. Successful intermodal transport, especially short-
distance services, require customised strategies and new business models rather than a pure
infrastructure-based solution to grow traffic.
6. Conclusion
This paper explored influences on a migration of hub status in an intermodal network from
a port to an inland node by following the life cycle of an inland terminal development. The
longitudinal case study approach enabled an observation of the life cycle evolution of the
terminal both in terms of its own development and operation as well as its changing relationship
with regard to the maritime actors, including the port authority, port terminal operator and
shipping lines.
This case confirms certain well-known but frequently overlooked facts of successful
intermodal operations, such as the importance of a single large customer to guarantee traffic to
establish a service and the importance of integration between the terminal and rail service
20
operations, using the terminal as a cost centre rather than profit centre in order to support the
service. However, other innovative features were also identified, such as the direct involvement
of shipper Jula in the intermodal service in various ways. These included an open-book
arrangement to keep the costs down for the shipper while also building trust, and a further level
of integration through purchasing the wagons. This unusual step of the shipper being part of
the rail service enabled them to cross-subsidise their own flows with the income from the other
containers. The use of LHVs was another innovative step that required some collaboration from
the terminal operator as regards opening hours and related charges. All of these operational
developments enabled the building of a successful intermodal service.
However, to take it to the next level, the terminal needed to be part of this integrated
management, in order to allow the empty container depot, longer storage to use the terminal as
a buffer, and waiving certain terminal handling fees in order to enable connection of different
services without extra charges. All of these strategies saved money for Jula themselves while
also keeping prices down for other users. The crucial element as regards the Inside-Out vs
Outside-In strategies is that a port actor would not have been able to achieve all of these
synergies, thus, while Inside-Out terminals are often more difficult to develop successfully due
to the lack of integration with port actors, in this case the integration with a local shipper
eventually enabled the terminal to achieve a level of success that induced cooperation from the
terminal operator and in particular the shipping lines. Therefore, while it is something of a
truism that good intermodal transport requires vertical integration between terminal and rail
service operator, and sometimes a port actor, more attention in future should be paid to
integrating the shipper in both the rail service and terminal operations.
The partial migration of hub status from port to inland terminal is of course not a complete
transfer of all services and the system is continuing to evolve. The Falköping terminal now has
several services direct to Germany, but the next steps are to attract services from the north of
Sweden to bring their timber traffic via Falköping as well as direct services to the port of
Hamburg and perhaps other ports. If the timber traffic is diverted to be containerised at
Falköping rather than at the Port of Gothenburg, this would deprive the port authority of
logistics revenues, and if port flows are diverted to the port of Hamburg for direct rail transport
to the Swedish hinterland, then the port terminal will lose some revenues. Such entrepreneurial
activities were not possible under the former city-based governance model, and how they play
out will determine the success of this extension strategy phase of the life cycle as a result of
the changed business model and governance of the inland terminal.
21
The theoretical framework used in this paper was the intermodal terminal life cycle, which
provides a longitudinal perspective allowing an analysis of some major changes to the terminal
that can influence its role and hence the spatial development of the intermodal network. The
main focus was on the third and fourth phases, where the key features of the terminal and its
role have changed noticeably, far removed from the intentions when the terminal was originally
developed by the city. The case demonstrated physical restructuring (terminal expansion),
operational changes (addition of logistics services, change of traffic sources and different rail
operators using the terminal) and institutional redesign (new business model with the shipper
running trains to the site, later integration between terminal and shipper). The two primary
influences on the ITLC identified in the case were integration and logistics. The theoretical
implications of this result are that the geography of intermodal terminal networks could benefit
from comparisons with the existing body of work on the geography of port systems, in which
it is common to expect consolidation of flows at hubs, it is almost standard practice that port
terminal operations will be devolved to the private sector, terminals will vertically integrate
with the main users (shipping lines) and competing with other ports by providing facilities for
logistics activities becomes increasingly important. The smaller scale and specific regional
characteristics of intermodal terminals means that such evolution will be less common than
with ports, but the case showed that, in order to be successful in the long term, such options
should certainly be considered. Future research needs to explore how new terminal
developments or indeed any existing terminal preparing long term strategy documents can map
out different long-term pathways according to the ITLC. The primary aim of such a model is
to aid decision makers preparing as best they can for a variety of long-term futures that are not
obvious when the terminal is planned.
The two other related theoretical perspectives utilised were the terminal’s role in the port
life cycle and the directional development model. In both of these models, the role of the inland
terminal is generally subordinate, assisting the port in splitting its activities, moving some
activities inland in order to allow the port to continue its traffic increase. This case provided
the opportunity for an alternative perspective, following the case of an Inside-Out terminal that
began subordinate but then evolved into a position where it challenges the port’s role to some
degree. Thus this case provides strategies for a successful Inside-Out development, confirming
the proposal of Wiegmans et al. (2020) that such terminals need to be more proactive. The key
here is the long-term perspective, in which the terminal could not be so proactive in its early
years and never would have predicted such an outcome when the terminal was developed.
Therefore the long-term perspective of the ITLC is able to enrich the other two theoretical
22
perspectives of the port life cycle and the directional development theory. Both of these two
perspectives need to be examined in future research with longitudinal cases that reveal how a
changing business model, and particularly the involvement of the shipper, can influence the
relationship between the port and the inland terminal over time. There is a wealth of case
studies of inland terminal development in the literature but it would be valuable for researchers
to revisit some of them to examine how their development paths have evolved, how that
evolution has modified the geography of their networks and what such modifications reveal for
the three theoretical perspectives applied here, particularly the intermodal terminal life cycle.
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... Therefore, the next factor, efficient handling of cargo and transport means in intermodal terminals and seaports, becomes very important for the efficient use of intermodal transport in freight transport. This can be done through a variety of Hub-and-spoke (HS) networks (Kreutzberger and Konings, 2016), by directly monitoring and managing the presence of containers at terminals (Yan et al., 2020), or by implementing a direct management algorithm based on the history of previous cargo transportation (Bergqvist and Monios, 2021). This gives rise to the factor of educated and qualified staff. ...
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