THE DEVELOPMENT OF MULTIMODAL LOGISTICS PLATFORMS AND FREIGHT FOCUSED AIRPORTS

By Franco Eleuteri
Professional Engineer B.Sc (Mech) Engineering, Masters Industrial Admin. (University of Cape Town)

Trends in the New World Economy

The importance of trade with the ability to move goods efficiently is recognized as a generator of economic development and job creation. This is exemplified by the fact that more globalized poor countries achieve significantly higher GDP per person growth rates than those that are less globalized.

Numerous examples of this trend can be found in Asian economies, which as a result of export driven initiatives, have made significant strides in job creation by accessing the major consumer markets abroad. These have been with a focus on exports primarily to North America and Europe .

The infrastructure required to implement these initiatives was initially created around port cities such as Hong Kong for the movement of freight by sea. This was followed by the need to move higher value added product by air in addition to having a deepwater port.

In addition, special industrial and economic development zones were created around sea and airports, with the objective of stimulating and facilitating export driven activities.

A further evolution of this trend motivated by increased market growth, has resulted in the creation of IDNs (Inland Distribution Networks) and Inland Ports.

These projects, which incorporate the development of a value added logistics capability, are motivated by:

• The trend towards the global outsourcing of manufacturing, office and transportation functions
• The establishment of free trade agreements facilitating the movement of goods and freight on a global basis
• The evolution of the soft and hard elements of Global Supply Chain
• The growth of the “Integrators” and the expanded use of express freight in addition to that of traditional air cargo
• The predominant growth of freighters for the movement of airfreight in contrast to belly cargo, particularly in the movement of express material
• Military base conversion programmes that have taken place worldwide particularly after the end of the Cold War
• The move towards privatisation and the need to capitalise on transportation hubs as a means for economic development and job creation.

Recent efforts towards the creation of Special Economic Zones in association with transportation hubs, in emerging countries such as India (Navi Mumbai) and the Philippines (Subic Clark), capitalise on these trends while focusing on attracting MultiNational Corporations (MNCs) and export focused enterprises.

These ventures recognize that the creation of the required transportation infrastructure is a critical element of an export focused strategy, aimed at job creation and economic development.

A principal driver in the creation of export driven zones and freight airports, including airport cities, is the trend towards outsourcing by the developed countries of the world.

This phenomenon is most strongly experienced in North America due to its high labour costs and free market policies.

While initially it was thought that this trend would be confined to labour intensive manufacturing operations, it has further extended to the service industry including back office functions. This approach is also utilised but to a lesser degree in Europe, due to existing higher levels of unionisation and the sources of low cost labour in Eastern Europe .

A further growing market sector is the export of perishable product. It includes the sourcing from emerging countries of fresh produce and fish, for the major world metropolitan urban centres, with their higher per capita incomes. This has been accelerated by the growing market in organic food, which is more labour intensive to produce and obtains higher prices.

As part of this trend, industrial strategies have focused on the creation of Export Processing Zones by countries such as China and India . In particular the Pearl River Delta including Hong Kong has become the greatest generator of manufactured product abroad, which is then exported to the United States and the Western World.

In addition to the creation of Export Processing Zones and in order to further facilitate the manufacture and export of goods, use has been made of bonded applications and bonded warehouse areas. These have evolved into the creation of secure and bonded logistics pipelines and value added logistics platforms.

The principal characteristic of a value added logistics platform is that it creates an integrated multimodal (sea, air, land) transportation capability. This provides different levels of service for the movement of goods both on a regional and an international basis.

It further creates a secure environment for processing of goods as an integral part of the transportation cycle. This capability is designated as value added logistics.

In addition, the issues of customs and security and associated regulatory needs have become of particular importance after the 9/11 incident, which resulted in a number of initiatives being implemented to create Smart and Secure Trade (SST) lanes. These include:

C-TPAT U.S. Customs Trade Partnership Against Terrorism

24 hour Advanced Manifest Information Rule

CSI Container Security Initiative.

The traditional Customs function is therefore being expanded to address international trade security programs as an additional element of the Global Supply Chain.

To implement these initiatives requires the use of electronic manifest systems, track and trace capability and web based applications, in addition to providing conventional physical security barriers.

The creation of secure and bonded transportation feeders and value added logistics platforms is therefore important in order to participate in world trade. These incorporate integrated sourcing, processing and transportation functions, in addition to providing both time definite and time critical levels of service.

The creation of a viable freight hub or logistics platform requires a focus both on the principal catchment areas that are served and the specific market opportunities which will contribute to its financial success.

This is particularly important as a result of the significant infrastructure investment required to create a new platform with an intercontinental capability.

As an example, the existing African air cargo market, beyond that existing within the SACU countries, is minimal in comparison to the major European, Asian and North American markets for high value-added express freight. Consequently, the existing market scenarios do not easily motivate scheduled freighter operations.

Therefore, as an initial consideration smaller markets are possibly better served by belly freight or combi, commuter type aircraft which move both passengers and air cargo.

However, by not creating an improved logistics capability, the region cannot effectively export value added goods or perishables, therefore not enabling it to achieve the full benefit of international trade.

This is indicated by the fact that express or time critical shipments have an average value per hub twice that of general air cargo. In addition, as reported by the U.S. Department of Commerce, they achieve growth rates which can be four times that of general air cargo.

It is therefore important to create an enhanced logistics capability as a means to achieve economic development, while efficiently serving the major international consumer markets.

Express (Time Critical) Freight – Market Growth

The need to create multimodal (sea-air-land) logistics platforms as a means to access international markets needs new and imaginative thinking.

It also requires the definition of a strategy and plan enabling the platform to provide the required levels of service on a cost effective basis, in order to move product to and from the target markets.

As an example, alternative options to a focus on passengers driven belly freight movement, include:

locations. This is in addition to the Port Authority signing an agreement with the Panama Canal Authority incorporating mutually beneficial marketing efforts and the sharing of data in order for the all water route to compete with the sea-land alternative

The investment and management by Fraport in the Hahn Airport as a twinned air freighter focused air cargo platform, complementing the existing capability of Frankfurt International Airport both as a main passenger and cargo hub

The movement by the Integrators of dedicated freighters between intercontinental hub locations such as Memphis , Louisville , Subic Bay, Clark, Brussels , Cologne , Liege and East Midlands

The creation of “ Main Port ” type transportation hubs or Logistics Gateways including sea and air operations, and their associated Inland Distribution Networks as developed in Holland (Schiphol and Rotterdam ), Hong Kong and Incheon , Korea

Notwithstanding the variety of twinning arrangements that are implemented, the primary goal is to enable a more efficient movement of freight as part of the Global Supply Chain, in order to capitalise on both the financial and the economic benefits that will result.

The creation of freight focused airport or transportation hubs was traditionally undertaken by the public sector as an infrastructure development.

This trend has changed to the use of P-P-P (Public-Private-Partnerships) and in a few cases private sector only initiatives.

An example of this trend, is the participation of the private sector in the conversion of decommissioned military bases, as a means to create new jobs to offset those that were being lost by demilitarisation.

Another trend is the use of the specialist skills and capital of the private sector as property developers, focused on logistics driven opportunities, while maintaining the public sector's strategic objectives.

Examples of freight focused airports that have been created on a global basis with differing development formulas include:

The Alliance Development north of Fort Worth, Texas as a successful multifunctional private sector project created by Hillwood Properties with an overall size of 15,000 acres incorporating a freight focused airport, with Federal Express as an anchor tenant.

This is primarily a private sector project with the exception of the runway which was built with public (Federal) funds.

The Vatry International Airport in the Champagne region, 150 km from Paris which is a multimodal (air, road, rail) logistics hub and industrial park part of a 2,000 hectare development of which the freight airport takes about 360 hectares.

As part of the development strategy, the General Council of Marne signed a 20 year contract with a private group for the operation, management and promotion of the project. This comprises: Aeroports de Montreal Capital Inc., Keolis, Pingat/SNC Lavalin and the local Chambers of Commerce of the Reims, Epernay , Chalons en Champagne and Troy .

The Subic-Clark Development in the Philippines designated as the SCAD (Subic Clark Alliance Development) program.

As part of this initiative, these two locations are jointly promoting themselves under the auspices of the public sector BCDA Bases Conversion Development Authority while involving the private sector in individual elements of a multifunctional programme. Present efforts are focused on the further development of Subic Port and the Clark Airport . Both Federal Express and UPS utilise the two airports as their Integrator hubs in Asia .

These are a few examples of numerous such projects being developed as freight only or passenger – freight transportation centres and industrial development zones worldwide. Each of these capitalises on its location advantage, existing resources and infrastructure while seeking to create a competitive environment.

In addition as part of an initiative to capture on NAFTA traffic between Mexico , the United States and Canada , a North American Inland Port Network has been developed. This has the objective of creating a common operating platform for such Inland Ports as KellyUSA in San Antonio and Villa XXI in Monterrey in addition to numerous other locations on this major transportation corridor.

Incheon International Airport , Korea - A Multifunctional Solution

It is therefore apparent that new concepts and techniques need to be considered in order to create multimodal logistics platforms. These incorporate the creation of transportation hubs as part of a multifunctional working, living and recreation-resort environment. An example of this is the new internationalairport in Incheon , Korea which is being developed as an “airport city”.

These new developments require a rethink of traditional concepts as to the function of a port and how it relates to other modes of transportation.