Estimation of the benefits for shippers from a multimodal transport network

Abstract

This paper develops an economic assessment of a multimodal transport network for single pallets. A shipment-size choice model is estimated to calculate the shippers’ reactions and their economic benefits from that transport network. In the model, the major factor influencing logistics decisions—the balance between warehouse and storage cost—is explicitly taken into account. The functional form is deduced from the first-order condition of the minimization problem of total logistics cost. Transport cost is expressed in the form of a complex function depending on shipment size and transport distance in order to capture the effect of economies of scale in transportation. The model parameters are estimated based on empirical data from two major German corporations. Simulations show that the new intermodal transportation system has a significant impact on the shipment-size distributions changing them in favor of smaller shipments. This leads especially to significant reductions in warehouse costs. Finally, some implications of the analytical results on transport policy are provided: To foster green logistics and achieve further modal shifts from road to rail, public financial support and the regulatory framework have to enable railways to consolidate small and logistics demanding shipments at an industrial scale.