Cooperation among freight forwarders: Mode choice and intermodal freight transport

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    has not joined the coalition. However, user surplus is negative in all coalitions, which shows that the

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    other transport providers. In this role, the freight forwarder acts asa principal rather than an agent. The United Nations Conference onTrade and Development (UNCTAD, 1995) has categorised freightforwarders in ocean-based Multimodal Transport Operators(MTOs) or Vessel Operating Multimodal Transport Operators

    as they must adapt and provide more value-added logisticsactivities in order to respond effectively to the ever-changingneeds of customers logistics requirement. This has led freightforwarders to effectively become third-party logistics serviceproviders (3PLs), particularly with regard to internationalfreight logistics services. In order to compete, many 3PLs haveutilised price competition and sales-inuenced strategies. Asa result, only arms-length relationships between 3PLs andtrading rms are developed (Banomyong & Supatn, 2011).

    * Tel.: 47 (0) 71214234; fax: 47 (0) 71214100.

    Contents lists available at

    Research in Transpo

    .e l

    Research in Transportation Economics 42 (2013) 77e86E-mail address: naima.saeed@himolde.no.tional freight forwarders sector. Most denitions imply that freightforwarders play the role of the intermediary in international trans-port. Common denitions portray International freight forwarders(IFFs) as logistical specialists for export shipments (Cateora &Keaveney, 1987). Other views, however, indicate that IFFs provideboth export and import services (Pope & Thomchick, 1985).

    In the recent past, however, freight forwarders have assumedanother role, not only helping the parties get the goods transported,but also undertaking to have the goods transported by their ownmeans of transport (truck/train/ship) or making arrangements with

    while very few freight forwarding companies deal with railwaytransport, even casually (Kokkinis, Mihiotis, & Pappis, 2006).

    Undertaking the arrangement of the routing and choice ofmode for the customer, together with any ancillary service suchas customs clearance or packing. This level of involvementintroduces a higher level of expertise, which the shipper maynot always be able to provide.

    Offering stand-alone ancillary services, such as warehousing,customs clearance, packing and port agency.

    Moreover, freight forwarders must work closely with shippers1. Introduction

    Freight forwarders have long pcommerce and the international carrifreight forwarder has been the link beand the carrier, and provided forwarforwarderacted as the agent for theow

    Researchers have failed to agree0739-8859/$ e see front matter 2012 Elsevier Ltd.http://dx.doi.org/10.1016/j.retrec.2012.11.005an important role ingoods. Traditionally, thethe owner of the goodsr clearing services. Thef the cargo or the carrier.nition of the interna-

    (VO-MTOs), and those that do not operate vessels eNon-VesselOperating Multimodal Transport Operators (NVO-MTOs).

    Some of the functions included in the freight forwardersactivities are:

    Acting on the customers behalf to procure the most suitablemode/combination of transportmodes, be it road, rail, sea or air.However, road, sea and air transport is most commonly used,Bertrand modelCoalitionservice providers. 2012 Elsevier Ltd. All rights reserved.Intermodal-transportGame theory

    establishment of these kinds of cooperation is not benecial (in terms of prices) for the users of theseCooperation among freight forwarders:transport

    Naima Saeed*

    Department of Economics, Informatics and Social Science, Molde University College, Sp

    a r t i c l e i n f o

    Article history:Available online 26 November 2012

    Classication codes:R40L91

    Keywords:Freight forwarders

    a b s t r a c t

    The objective of this paperThe paper analyses three frst two players are truckown ship. For the purposesbest form of cooperation ilition with the ship-operabetter payoffs in the form

    journal homepage: wwwAll rights reserved.ode choice and intermodal freight

    ised University in Logistics, 6402 Molde, Norway

    o compare vertical and horizontal cooperation among freight forwarders.ht forwarders (players) with two different means of transportation. Therating freight forwarders. The third player is a freight forwarder with itsanalysis, the paper applied a two-stage game. The results revealed that thee one in which the large truck-operating company would establish a coa-company; that is, vertical cooperation. This cooperation would generaterot, not only to the members of this coalition, but also to the player that

    SciVerse ScienceDirect

    rtation Economics

    sevier .com/locate /retrec

  • completion. According to (Chu, 2005) there are two incentives forinvolving a subcontractor. Firstly, when the total demand is greater

    have large volumes of cargos to transfer and will therefore beable to negotiate better agreements with the carriers, load their

    forwarders can also provide value-added services to theircustomers, which will yield economies of scope.

    Moreover, one of the disadvantages of sea transport (secondplayer) compared to road transport (rst player) is lowfrequency. In order to offer a satisfactory level of frequency andexibility in service, sea transport needs a certain volume ofcargo critical mass. The formation of a coalition will help thesea transport to achieve this critical mass.

    Other disadvantages of sea transport (second player) are slowspeed and low exibility. However, there may be room toimprove these drawbacks by combined transport solutions,using faster modes of transport on part of the journey. This isillustrated by an example of a differentiated set of transportalternatives between Kobe, Japan and Amsterdam. A customercould choose pure sea transport, which would take 28 days butat a very low cost. A faster alternative would be the landbridgesolution of transporting the cargo by train over the USA. Aneven faster alternativewould be a combined air-sea alternative,

    tatiothan the overall capacity of owned trucks, logistics managers mayconsider using outside carriers. Secondly, integrating the choice offullment mode into transportation planning may bring signicantcost savings to the company because better solutions can begenerated in an extended decision space. This extended problem isknown as integrated operational freight carrier planning.

    A freight forwarding companys prot is the difference betweenthe price that the customer is obliged to pay for the requestexecution and the costs of request fullment. These costs resulteither from fullment by the companys own transportationcapacity or from the external processing of orders as a consequenceof involving a subcontractor (Krajewska & Kopfer, 2006).

    As globalisation proceeds, large international freight forward-ing companies have a competitive advantage over small companiesdue to their wider portfolio of disposable resources and marketpower position. This leaves medium- and small-sized carrierbusinesses with the option of establishing coalitions in order toextend their resource portfolios and reinforce their market posi-tions (Krajewska & Kopfer, 2006). Moreover, the structure of largefreight forwarding companies often assumes autonomously oper-ating subsidiaries that should cooperate in order to maximisebusiness overall prot.

    The purpose of having freight forwarders cooperate is to ndequilibrium between the demanded and the available transportresources within several carrier entities by interchanging customerrequests (Kopfer & Pankratz, 1999).

    1.1. Players

    In this paper following three players are dened:

    1. A freight forwarder with its own means of land transport(trucks). This is assumed to be a large truck-operating company.

    2. The second player is a small truck-operating company that alsoworks as a freight forwarder.

    3. The third player is a freight forwarder with its ship. This type ofplayer is known in the literature (see UNCTAD, 1995) asa vessel-operating multimodal transport operator (VO-MTO).VO-MTOs are ship owners that have extended their servicesbeyond carrying the cargo from port to port to include carriageover land and even by air. They may or may not own the othermeans of transport, in which case they arrange for these typesof transport by subcontracting with such carriers.

    1.2. Different combinations of coalitions

    Various combinations of coalitions are possible in this situation(see Fig.1).

    1.2.1. Coalition between players 1 and 3 or between players 2 and 3For instance, if player 1 or player 2 cooperated with player 3, this

    wouldresult inan intermodal freight transportation situation. This typeof cooperation is considered vertical cooperation because it involvesMany enterprises outsource transportation tasks by entrustingindependent freight forwarding companies with their trans-portation activities. The forwarding company is allowed to choosethemode of fullment; that is, it can use its own vehicles to executethe corresponding entrusted tasks (self-fullment), or an externalfreight carrier (subcontractor) receives a fee for the request full-ment (subcontracting). The subcontractor receives independentshipment contracts of different types and specications for

    N. Saeed / Research in Transpor78two different means of transportation; that is, trucks and ships.means of transport to capacity, and decrease costs. In so doing,they will achieve economies of scale by transferring largequantities per cargo.

    Economies of scope: Having established cooperation, freight1.2.2. Coalitions between players 1 and 2Similarly, players 1 and 2 could cooperate with each other. This

    is considered horizontal

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