Multimodal logistics has become an important element of the supply chain. In today’s fast-moving trade world, goods must travel from one country to another across thousands of miles in the shortest time possible.
Single-mode transportation is simply no longer enough. A seller (distributor, retailer, manufacturer or trader) may not have the luxury of time to oversee delivery of goods across thousands of miles, involving many logistics service providers.
Multimodal logistics simplifies the source to destination process for clients by consolidating all the modes of transport into a single contract. That is its main advantage.
Multimodal logistics is a term more commonly used in the United Kingdom of Britain and Europe. The USA, in general, and some other parts of the world prefer the term ‘multimodal transport’. Both are the same thing, similar to multimodal transportation merely being a lengthier form.
Read on to learn more about all its pros and cons, as well as how it differs from intermodal transport.
Background to multimodal transportation
Before the multimodal system was created, a seller would sign separate contracts with a number operators for road, rail, sea or air transport. The further and more complex the delivery, the more contracts the seller has to make.
Once the seller’s products are ready to be shipped, they are passed on from one operator to the next until they arrive at the target destination. This can prove to be a very tedious task for the seller, as he would have to deal with a stack of paperwork.
Multimodal logistics does away with that hassle. By simple definition, it means the movement of goods using at least two modes of transportation under the terms of a single contract. The contract is also known as a Combined Transport Bill of Lading or a Multimodal Bill of Lading.
In short, the contract is simply referred to Bill of Lading or BL. Through this BL, a multimodal transport operator (MTO) is fully liable for the entire journey of the client’s cargo from the source or pick-up point until the intended destination. The cargo might be shipped through different platforms, such as road, sea, air or rail.
Most MTOs will sub-contract to specialised carriers during some point of the cargo’s journey. MTOs that are larger may have their own vehicles and even warehouse facilities.
Features of multimodal transport
In summary, the most common characteristics are:
- At least two modes of transport are used to deliver a single cargo
- Only one contract is used to move the goods
- Delivery can be domestic or international transport route can be through a combination of sea, air and land using mixed vehicles
- Delivery distance ranges from short to long
- Cargo tracking can be done through satellite systems
Multimodal transport example
Here is an example of Port-to-door delivery:
A seller signs a contract with a multimodal logistics operator to deliver goods from port of loading in Germany to a warehouse in Russia.
The MTO collects the container from the German port and ships it to a Russian port using a cargo vessel. The cargo is then transferred to a freight train using a heavy-duty tractor truck. The train carries the container to the city in Russia.
The goods are removed from the container at the train station and transferred to smaller trucks or vans for easier manoeuvrability through the city. The trucks or vans then deliver the goods to the designated warehouse.
Throughout the journey of the cargo, the seller is informed of his good’s location and progress. Satellite systems can be used to track cargo movement.
As you can see, the variety of vehicles used for the completion of the contract through sea and land involved cargo ships, tractor trucks, freight trains, trucks and vans.
Types of multimodal transport
MTOs can be divided into the following types:
1. Vessel Operating MTO (VO-MTO) or Direct Operator
This type possesses and operates its own vessels. It usually leaves the transport of goods by land and air to sub-contractors. Inland stevedoring and warehouse services are also sub-contracted. However, some VO-MTOs now extend their services to include land and air carriage.
2. Non-Vessel Operating MTO (NVO-MTO) or Indirect Operator
Also known as Non-Vessel Operating Common Carrier (NVOCC), it does not own or operate ocean carriers. This type of MTO usually possesses only one type of transport means.
Some NVO-MTOs do not own any vehicles and often subcontract all modes of transport. They include:
- freight forwarders
- customs brokers
- warehouse operators
- stevedoring companies
Advantages of multimodal logistics
1. One contract to keep track of
A seller makes a contract with only one MTO for the delivery of product from source or pick-up point to the end destination. The appointed MTO is responsible for arranging all manner of transportation and documentation to ensure the BL is fulfilled. The seller only deals with the agent or officer assigned to him by the contracted MTO.
2. Less time and effort
With only one agent from one MTO to liaise with, a seller need not call a string of different companies to arrange for a delivery. Time and effort is kept to a minimum.
3. Cost reduction
MTOs with extensive reach and capacity can help their clients save money. Some MTOs have their own fleet of vehicles. They are also large enough to strike cheaper deals with subcontractors.
4. Handling and delivery time efficiency
Having a multimodal logistics operator manage the delivery of product results in better handling and delivery time as compared with having many single logistics operators. There is less likelihood of miscommunication and delays.
5. Easier freight tracking
A single bill of lading is definitely easier to track and keep a record of than 12 BLs for a single delivery.
6. Reduced number of times cargo is handled
The less change of hands involved, the less chances of the cargo being damaged or misplaced.
7. Increased transport security
The assigned MTO bears the responsibility of the cargo. It will ensure that the transportation of cargo is safe and successful.
8. Less contact with customs
The MTO handles customs clearance for its clients, reducing the clients’ need for contact with customs officers.
Disadvantages of multimodal logistics
1. Unable to choose preferred carriers
Since the MTO is in-charge of arranging for the entire journey of product delivery, clients are unable to choose specific carriers for any part of the journey.
2. No single convention
There are no international regulations for governing multimodal transportation arrangements as a whole. This may produce certain legal conflicts, especially for international trade.
For instance, Hague-Visby rules and Hamburg rules govern the sea leg of the route. Contracts for carriage by road are regulated by the CMR.
The Rotterdam Rules may be specific to MTOs but the caveat is that it does “not operate to contracts which have no provisions regarding carriage by sea.”
What is intermodal transport?
There is often a confusion between intermodal transport with multimodal logistics. Both share many similarities but the key differences are the number of contracts and cargo treatment.
Intermodal transport also involves a combination of at least two modes of transport in delivery cargo from point A to point B; usually from one country to another. However, every part of the process is contracted with a different logistics provider or carrier.
The cargo is also maintained in the container from start to end of the delivery process. The contents of the container are not taken out from the said container throughout its route.
Intermodal versus multimodal
Since intermodal transport operates under separate contracts, clients can choose their own carriers with the lowest rates for each mode of transport.
Some clients prioritise more environmentally friendly options to reduce their carbon footprint. Intermodal transport allows this flexibility.
However, multimodal logistics is signed through only one bill of lading. All the carriers are decided by the MTO. Clients have little or no say as to which carrier should be subcontracted or not for any part of their product delivery route.
Since contracts are done separately for intermodal transport, clients can negotiate for the best terms with each company. The disadvantage is having to keep track of all these contracts with different carriers. This will pose an overhead cost for clients in terms of time and manpower.
In intermodal transport, miscommunication between different companies may also cause a delay in delivery. This issue is likely to happen in international trade as the staff of these companies may not speak one another’s languages fluently.
Delays may also be compounded if the client forgets to inform the next carrier about an earlier carrier’s delay. This issue is less likely to occur for a multimodal transport operator who will handle all the communications and coordination of the delivery. The client just needs to wait for updates from the MTO.
Another advantage that multimodal logistics has over intermodal is that multimodal is far more manpower efficient for a client or consigner. All the running about from port to port, etcetera, is carried out by the MTO’s personnel. The client does not need to have that many staff on hand to supervise the delivery of his goods to multiple customers in different countries.
Professional logistics providers, such as TRANS Oriental Partner (TOP) Logistics, can help you determine the best modes of transport and manage all aspects of your freight movement.
TOP Logistics is a leading MTO of the commercial port of Vladivostok in Russia. It has comprehensive support for customs and foreign trade operations through an all-Russian customs representative (GTK-Service), which makes for smoother movement of cargo in and out of Russia.
TOP Logistics even has its own container fleet catering to different cargo needs, such as the Open Top, Flat-rack, refrigerated and 45’ PW. Warehouse facilities are included, both its own and its partners’, all of which are well guarded and equipped.