University of Calgary PRISM: University of Calgary's Digital Repository Richard Parker Professorship Repository Calgary Regional Partnership Documents 2015 A SUPPLY CHAIN’S GUIDE TO INLAND PORTS: How inland ports can help lower costs and move your products faster Johnston, Reg (RJ T&L Consulting Ltd.); Van Horne Institute, University of Calgary; Brown, Jim, JRSB Logistics Ltd Johnston, Reg (RJ T&L Consulting Ltd.), & Van Horne Institute, University of Calgary, & Brown, Jim, JRSB Logistics Ltd. (2015). A SUPPLY CHAIN’S GUIDE TO INLAND PORTS: How inland ports can help lower costs and move your products faster (Tech.). Calgary, AB: Calgary Regional Parnership. http://hdl.handle.net/1880/107176 technical documentation Downloaded from PRISM: https://prism.ucalgary.ca A SUPPLY CHAIN’S GUIDE TO INLAND PORTS How inland ports can help lower costs and move your products faster 03 CHAPTER ONE What is an inland port and how it can benefit your supply chain today 07 CHAPTER TWO 4 key advantages of inland ports to boost your supply chain 11 CHAPTER THREE Shipping to an inland port: Helping reduce your total landed cost 16 CHAPTER FOUR Growth of inland ports: 4 need to know trends for 2016 18 CHAPTER FIVE Choosing an inland port: 8 crucial tips to lower your total landed cost 22 CHAPTER SIX How intermodal containerization led to the growth of inland ports 27 CHAPTER SEVEN Rail transportation through inland ports: Advantages and disadvantages 36 CHAPTER EIGHT A beginner’s guide to Western Canada’s major inland ports 48 CHAPTER NINE Case Study: 6 ways the Calgary Region Inland Port lowers your costs and move products faster in Canada CHAPTER ONE WHAT IS AN INLAND PORT AND HOW IT CAN BENEFIT YOUR SUPPLY CHAIN TODAY? HOW DOES AN INLAND PORT HELP YOUR BUSINESS? Peter Wallis, President and CEO, Van Horne Institute, points to the increasing importance of inland ports as a critical link in the global supply chain. “There’s a closely knit network of supply chain capacity created by the relationship between seaports and inland ports. These seaports and inland ports collaborate in a synergistic manner to provide multi-modal options that allow for highly efficient management of a supply chain,” explains Wallis. Wallis also recommend reading a white paper, developed by global real estate firm Jones Lang LaSalle (JLL) called “The emergence of the inland port,” that provides a great overview on inland ports. The following content was inspired by that paper. 03 CHAPTER ONE WHAT IS AN INLAND PORT? According to JLL, an inland port is a hub designed to move international shipments more efficiently from maritime ports to inland for distribution. While the concept of inland ports isn’t new, where they are located is increasingly critical to the global supply chain. Inland ports can impact logistics decisions ranging from shipping routes to warehouse locations. The following are characteristics of an inland port: • Proximity to a large population base • A major connection to seaport via railroad • In many cases, Foreign Trade Zone status and privileges • Available real estate for warehousing and distribution WHY IS THE DEMAND FOR INLAND PORTS INCREASING? JLL suggests that the reason for the rising demand for inland ports is simple: effectiveness and efficiency. The supply chain is all about obtaining the best total landed cost while meeting business plans. 04 CHAPTER ONE RISING TRANSPORTATION COSTS In many cases, transportation costs are going up significantly. They are expected to increase over the next several years, regardless of what happens with oil and gas prices. Other thoughts for increasing inland port use are regulations for things such as drivers’ hours-of-service and emissions reduction, among others. With increased trucking prices, shippers are looking for alternate ways to move freight in a more cost-effective manner. 05 CHAPTER ONE THE RISE OF INTERMODAL JJL makes the case for moving freight from seaports through intermodal transportation which includes rail. Inland ports are essentially multi-modal intermodal terminals connected to major seaports. If you have direct rail access, bringing goods from congested seaports closer to the customer can lower total landed costs. In addition, there can be efficiency advantages because inland ports are not typically as congested as at the seaports. BENEFIT TO BIG BOX RETAILERS Inland ports can also serve as a huge benefit for big box retailers that serve as some of the country’s largest importers. Many big box retailers are now focusing on inland ports and intermodal facilities. They are building facilities close to inland ports because it makes economic sense. 06 CHAPTER TWO 14 KEY ADVANTAGES OF INLAND PORTS TO BOOST YOUR SUPPLY CHAIN Over the past decade, there’s been a marked decline of local manufacturing along with and an increase in imports. Even with this shift, industrial real estate demand continues to expand. The real estate needs of importing businesses are driving this expansion. These companies are looking for strategic locations to support the new distribution patterns required for foreign-made goods. At the same time, Canada’s major ports face tremendous congestion with the increase of inbound volume of goods manufactured abroad. Projections for the next five to six years indicate some ports will triple containership capacity and freight throughput. To accommodate rising global imports, the industry is shifting more to an “inland port” model. Inbound goods are quickly off-loaded from ships and moved to inland distribution centers for subsequent handling and redistribution within the country. 07 CHAPTER TWO ADVANTAGES OF INLAND PORTS #1 Efficiency of rail shipping. Can exceed that of only using sea and road. #2 Avoids heavy congestion at seaports. #3 Increased capacity. A supply chain system that includes inland ports increases the intermodal capacity for inland freight distribution. The additional capacity allows for off-site storage. #4 Consolidation of import and distribution functions in one location. #5 More space available for warehousing and distribution facilities away from seaports. Many seaports have limited land available for expansion leading to a search for lower value locations supporting less intensive freight activities, such as transloading. An example of limited space is in the Vancouver metropolitan area, which is facing land availability issues. #6 Sustainable option. Rail travelling to and from an inland port uses less fuel than trucks. #7 Excellent market proximity to at least three million people within 320 kms. 08 CHAPTER TWO #8 Foreign Trade Zone status and privileges for many Canada’s inland ports. #9 Abundance of reasonably priced commercial real estate for warehousing and distribution. Relative to Canada’s East and West Coasts. #10 Collaboration of stakeholders on implementation and management of inland ports #11 Speeds flow of cargo between ships and major land transportation networks #12 Success of major retailers using inland ports. Among the first and largest users of inland ports – are major retailers and importers such as Walmart and Home Depot. Many of these logistics giants saved money by consolidating multiple distribution centers into smaller hubs situated at inland ports with adequate logistics capacity. #13 Become a buffer in supply chains, acting as a temporary warehousing facility #14 Improve speed-to-market and the lowest cost shipping for a desirable alternative. 09 CHAPTER TWO DISADVANTAGES OF INLAND PORTS While using an inland port can be advantageous, that doesn’t mean there aren’t downsides. Key disadvantages to consider include: #1 Each of Canada’s inland markets has its own regional potential for imports and exports requiring different transport services and modes of operation. It can be a time consuming process to research and compare the inland ports to determine which one offers you the lowest total landed cost. #2 Import-based logistics for inland ports tend to have a high priority as it’s the segment that generates the most income for carriers. #3 Due to trade imbalances (higher rates on inbound than on outbound containers), the value of the backhaul cargo can be quite low. Excess empty shipping containers for the backhaul tend to gather at inland ports. Shipping them back to the seaport empty or partially empty can be quite costly. 10 CHAPTER THREE SHIPPING TO AN INLAND PORT: HELPING REDUCE YOUR TOTAL LANDED COST Shipping goods into Canada can be tricky but determining whether the journey ends at a marine port can be even trickier. Beyond the simple logistics, the cost considerations can be endless. And sometimes the most logical market isn’t always the most practical choice when it comes to a business’ bottom line. If you can’t save money in the location you choose as a transit point, there may be no point being there. 11 CHAPTER THREE SHIP TO THE BIGGEST MARKET, RIGHT? NOT NECESSARILY “Choosing the locations to trans-ship through and/or store your products is one of the fundamental aspects of designing a logistics network,” says Calgary-based RJ T&L Consulting’s Reg Johnston. And sometimes, it might make more economical sense to ship goods past bigger markets in Canada, such as Vancouver, and on to smaller ones, like Calgary and use these inland locations as a central warehousing and distribution point. “If you don’t consider the locations that will save you the most money from a total landed costs perspective, then you can create some costs in your network and impact your bottom line,” he adds. That’s where the choice of inland ports comes into play. 12 CHAPTER THREE INLAND PORTS PROVIDE INVENTORY SPACE & LOGISTICS HUBS TO KEEP GOODS MOVING Using an inland port can boost the bottom line when it comes to the total landed cost side of the balance sheet. “A lot of inland ports are seeing success by taking advantage of their central location to a customer base.