Intermodal Freight Transport as a set of flows

The freight forwarder, during the transport service, may manage the transport service aiming to ensure that the transport agents are performing accordingly to the plan and that the goods are being conveyed within the conditions of the transport contract (Activity 9). The tracking is carried out via the messages sent by the various transport agents. In case of non-compliance (either delay or damage), the freight forwarder may take appropriate steps to either mitigate or solve the problem (which, for example, in case of delay may comprehend hiring other transport agents). Conversely, for any reason, such as: lack of available technology for supporting real time communication amongst transport agents (which is still often the case) or lack of technological interoperability, Activity 9 may not be possible to carry out, in these situations, any problem becomes visible only at the end of the transport service.

Also included in this activity are the functions related with the payments and, in case of delay or damage, the determination of the liability and, if required, the payment of indemnities. These functions may occur after the completions of the service.

As a final note, it should be emphasised that the sub processes, activities, or the tasks abovementioned may not occur or, alternatively, occur in a different order in real case situations. This happens because there is an almost endless variety of situations and cases, which cannot be documented. The example presented herein represents what the author believes to be a typical chain.

information and money) along an intermodal freight transport service. And, one the components used by D'Este to characterise an intermodal freight transport service is the conformability of the events (D'Este, 1996, pp 9). Two events to be conformable mean that the output of one must be identical to the input of the following one. The production of an transport service entails the execution of a set of conformable events.

In this research work, the author has identified four types of flows, being: physical flow (Figure 2.9), logical flow (Figure 2.9), liability flow (Figure 2.10) and capital flow (Figure 2.10). The physical flow corresponds to the effective movements of the goods between the origin and the destination. The logical flow corresponds to the exchange of information between the agents⁷⁰

As the structure of the flows results from the configuration of the process, there is a broad range of possibilities for their structure. In this way, the flows presented in the following sections correspond to the example of intermodal transport chain and respective process described above (

. The liability flow corresponds to the responsibility for the goods between agents throughout the transport service. Finally, the capital flow corresponds to the payments for the services carried out by the agents or due to legal obligations (like for example: the customs’ clearance).

Figure 2.7 and Figure 2.8).

2.2.3.1 Physical flow

As already mentioned, physical flow corresponds to the production of the various transport service’s legs. This flow was already documented during presentation of sub- process 2 and it is depicted in Figure 2.9. In summary, the physical flow on a leg corresponds to the picking-up of goods up at origin location, transporting to the terminal and finally unloading into the terminal. This flow repeats itself for the number of legs.

2.2.3.2 Logical Flow

During the production of an intermodal transport process a great amount of information is exchanged between the transport agents and between the freight forwarder and the

70 The (paper-based) documentation accompanying the goods is also considered as making part of the logical flow.

shipper. Sub process 1 is entirely based on the exchange of messages; while sub process 2 may also contain a significant amount of information transfer. Indeed, a factor of success of any intermodal transport chain lies on the capacity of the agents to exchange relevant information in a rapid and accurate manner. Robust information promotes transparency and it enables, firstly, the premature detection of deviations from what is established and the implementation of mitigation measures; secondly, the detection of eventual faults or the negligence committed by agents and, thirdly, the monitoring of agents and tasks’ performances.

Figure 2.9 – Physical (top) and Logical (bottom) flows along an intermodal transport

Figure 2.9 depicts the logical flow of the intermodal transport chain considered herein.

During Sub process 1, there is exchange of information between the shipper and freight forwarder, and between this agent and the various transport agents. The logical flow

time Sub Proc 1

Act. 2 Act. 1

Act. 1

Act. 2

Act. 3

Activity 4

Act. 5 Act. 1

Act. 2

Act. 3

Shipper Freight Forwarder

Transport Company

Receiver Terminal Physical

Logical Shipper Freight Forwarder

Transport Company

Receiver Terminal

Sub Process 2

Source: author

starts when the freight forwarder, on behalf of the shipper, approaches the various transport agents requesting for prices and transport conditions - Activity 1. Upon deciding the final transport chain’s configuration, a new logical flow occurs when the freight forwarder notifies all agents about their roles and obligations.

During sub process 2, information may be shared on multiple moments between transport agents and the freight forwarder, namely: loading goods at shipper’s premises (or terminal), transport, unloading goods at terminal (or final destination). The finalisation of Activity 3, in leg 1, can be sent either by the transport company or by the terminal.

A caveat should be made on the fact that the actual pattern depends on diverse factors, namely: architecture of the transport service, the technology available or the requirements set by the freight integrator. The involvement of different number of transport agents (like for example: the freight forward provide portion of the transport service) may render the need of less or different messaging.

The level of technology is also relevant, as the existence of real time tracking results in flows practically continuous between the various agents and the freight forwarder;

whereas in case of absence of a real time tracking system, the transport agents have to rely on mobile communications (or fixed communications at fixed locations) to periodically communicate with the freight forwarder. Moreover, on a same transport service the various transport agents may be at different technological development, which may force the freight forwarder to make use of various types of communication solutions. Finally, the freight forwarder’s decision on the moment and content of messaging may render different type of patterns. In any case, the example herein provides a typical snapshot on the logical flow.

2.2.3.3 Liability Flow

During a transport service, goods are prone to damage or even destruction, as a consequence of mishandling, accidents, or deterioration caused by natural sources (like sun or rain exposition, etc.). Furthermore, delays may occur either during transport (owing to, for example: congestion, bad weather conditions or negligence) or at terminal (owing to, for example, misplacement, misunderstanding or incorrect

labelling). Damage or delays may bring significant economic losses depending of the goods’ intrinsic value and the purpose they were meant for.

It is then necessary to define an adequate mechanism, so that, if such situation occurs the owner could be compensated from the losses. These mechanisms are laid down in the contract⁷¹

In an intermodal freight transport service, two types of contracts are established: one between the shipper and the freight forwarder, and other between the freight forwarder and the transport agents. The ultimate responsible for the goods is the freight forwarder, because it is this agent that establishes a contract with the shipper. Yet, who actually handles and transports the goods are the other agents, which have to bear the responsibilities in case of damage or delay. Therefore, a contract is established between each of these agents and the freight forwarder, where they assume the responsibility for the goods. It should be noted that this contract is not visible for the shipper, whom only perceives as full responsible the freight forwarder

established between the owner of the goods and the agent in charge for the transport - the freight integrator. The contract also defines the liability of this agent. The precise details of the contract vary from service to service, although due to the action of international bodies there are also standardised contracts (for transport services that involve lower risk).

72

Figure 2.10

.

depicts the liability flow of the intermodal transport chain considered herein. The liability flow occurs in Sub process 2 during the physical transport of the goods. It thus parallels the physical flow. From this results that during the transport service the responsible for the shipper is the freight integrator - Sub Process 2. Yet, for the freight forwarder, the responsibility is assumed by the agent that in each moment

71 Contracts are established between shipper and providers lying down all the rules and conditions of the service, namely: due payments and indemnities in case of any non-compliance. The definition of indemnities or compensations for faults is of particular relevance in case of a transport service.

72 A caveat should be made on the fact sometimes freight forwarders make visible these contracts by establishing them directly between the shipper and the transport agents. The freight forwarder’s purpose is to put herself aside of any liability. In case of a problem, the shipper to be compensated will have to identify the responsible, which is often difficult and bureaucratic. In any case, this type of transport services should not be considered intermodal freight transport services, since in this situation there is a contract for each leg and not a single contract ruling the entire transport chain. Recall the definition of intermodal freight transport service in Chapter 2.1.

has the goods, which may be the transport company - Activities 1 to 3 - or the terminal agent - Activities 4 and 5.

2.2.3.4 Capital flow

Capital is the raison d’être of any economic activity. The very existence of companies is based upon the goal of profiting from their activities. The transport sector is no exception and, in any intermodal freight transport service capital flows amongst agents due to three main reasons: payment of services, indemnities or compensations and customs duties.

Figure 2.10 – Liability (top) and Capital (bottom) flows along an intermodal transport

time Sub Proc 1

Act. 2 Act. 1

Act. 1

Act. 2

Act. 3

Activity 4

Act. 5 Act. 1

Act. 2

Act. 3

Shipper Freight Forwarder

Transport Company

Receiver Terminal

Capital Shipper

Freight Forwarder

Transport Company

Receiver Terminal

Sub Process 2

Contract.

Source: author

In what concerns the payment of services, the capital, firstly, flows from the shipper towards the freight forwarder and, secondly, flows from this agent towards the transport agents (namely: transport company and terminal) and authorities (customs).

The pattern of the capital flow depends upon the contracts established both between the shipper and the freight integrator, and between the freight integrator and every other agent. The contracts define the moment or periods of payments. Some contracts foreseen that the payment should occur before the production of the transport service, while others establish a period for payment after the completion of the service.

Naturally, each situation results in a different pattern.

In case of any non-compliance (for example: delay or damage) of the terms of contract, the responsible is due to pay an indemnity to the shipper. In an intermodal freight transport service, the compensation is a two level mechanism. Firstly, the freight forwarder compensates the shipper for all liability, as the former is from the latter’s point of view the only responsible of the transport service. Secondly, the freight forwarder demands a compensation from the agent or agents (transport or terminal agent) responsible from the non-compliance. While the first level is typically immediate, the second level is considerably harder to carry out since the identification of the responsible implies the unequivocal determination of the cause and moment, which is often difficult (or impossible) to determine with accuracy. The reasons for this situation include: progressive damage of cargo along several agents, lack of inspection or non-external damage (only visible upon visualisation of goods).

The final type of payment corresponds to the customs duties, and only occurs when cargo need to be cleared. Commonly, the payment is done by the freight forwarder.

Figure 2.10 depicts the capital flow for the intermodal transport chain under analysis. It is assumed that the payment occurs as soon as an agent fulfils her service and that the customs duties are paid immediately. As a result, there is capital flow only during sub Process 2 or after the completion of the transport process. Under this assumption, the first payment is made after the completion of the transport service (activity 3). The following payment is made upon completion of the customs’ clearance (activity 5). The next payment is to terminal agents (activity 4). Finally, the transport service of leg 2 is paid. The dashed arrows correspond to the possible indemnities.

2.3 Depicting the performance of an intermodal freight transport