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Modal Shift for Greener Logistics - Exploring the Role of the Contract

Eng Larsson, Fredrik LU and Norrman, Andreas LU (2014) In International Journal of Physical Distribution & Logistics Management 44(10). p.721-743
Abstract
Purpose

This paper investigates contracts of the intermodal transport market and the incentives they create for a modal shift and thus the financial and environmental efficiency of freight transport.





Design/methodology/approach

The research used a mixed-methods approach where qualitative case interviews and quantitative modeling was combined. Two cases of contractual relationships between a service provider and its intermodal train operator on a specific lane were investigated. The case findings were then consolidated and used as input for a model of the contractual relation. Findings were sought through an extensive numerical study.



Findings

The cases reported... (More)
Purpose

This paper investigates contracts of the intermodal transport market and the incentives they create for a modal shift and thus the financial and environmental efficiency of freight transport.





Design/methodology/approach

The research used a mixed-methods approach where qualitative case interviews and quantitative modeling was combined. Two cases of contractual relationships between a service provider and its intermodal train operator on a specific lane were investigated. The case findings were then consolidated and used as input for a model of the contractual relation. Findings were sought through an extensive numerical study.



Findings

The cases reported that intermodal rail operators had a strong production focus, transferring the capacity risk (i.e. the risk of unused capacity) to the service provider, which the service providers argued limited the shift from truck to intermodal transportation. We show that, due to the market structure, it is rational for the operator to transfer the capacity risk but not the profit. Consequently, a modal shift is only likely to occur when there is strong shipper pressure or low capacity risk. We present a risk-sharing contract that could potentially release this dead lock.



Research limitations/implications (if applicable)

The conclusions are modelling outcomes subject to assumptions based on the cases. For further validation, large-scale quantitative studies are necessary.



Practical Implications (if applicable)

We show that a three-part tariff in which the capacity risk is shared may lead to increased modal shift and hence assumed improved environmental performance.



Social implications (if applicable)

Instead of arguing for operators to be more customer-focused, policy-makers and other stakeholders may have more to gain by having both actors being more cooperation-focused.



Original/value

The paper is the first attempt to quantify how the contractual relations on the freight transport market affect the modal mix and thus the financial and environmental efficiency of freight transport. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Green Logistics, Modal Shift, Intermodal Transportation, Contracting, Service Providers, Sustainability, Risk Sharing, Incentive Alignment
in
International Journal of Physical Distribution & Logistics Management
volume
44
issue
10
pages
721 - 743
publisher
Emerald Group Publishing Limited
external identifiers
  • wos:000343384800002
  • scopus:84915791027
ISSN
0960-0035
DOI
10.1108/IJPDLM-07-2013-0182
language
English
LU publication?
yes
id
8cabc8ec-6e0e-4b36-b2b0-754e3af4f71d (old id 4449980)
alternative location
http://www.emeraldinsight.com/doi/abs/10.1108/IJPDLM-07-2013-0182
date added to LUP
2014-05-27 10:07:12
date last changed
2017-10-22 04:09:05
@article{8cabc8ec-6e0e-4b36-b2b0-754e3af4f71d,
  abstract     = {Purpose<br/><br>
This paper investigates contracts of the intermodal transport market and the incentives they create for a modal shift and thus the financial and environmental efficiency of freight transport.<br/><br>
<br/><br>
<br/><br>
Design/methodology/approach<br/><br>
The research used a mixed-methods approach where qualitative case interviews and quantitative modeling was combined. Two cases of contractual relationships between a service provider and its intermodal train operator on a specific lane were investigated. The case findings were then consolidated and used as input for a model of the contractual relation. Findings were sought through an extensive numerical study. <br/><br>
<br/><br>
Findings<br/><br>
The cases reported that intermodal rail operators had a strong production focus, transferring the capacity risk (i.e. the risk of unused capacity) to the service provider, which the service providers argued limited the shift from truck to intermodal transportation. We show that, due to the market structure, it is rational for the operator to transfer the capacity risk but not the profit. Consequently, a modal shift is only likely to occur when there is strong shipper pressure or low capacity risk. We present a risk-sharing contract that could potentially release this dead lock. <br/><br>
<br/><br>
Research limitations/implications (if applicable)<br/><br>
The conclusions are modelling outcomes subject to assumptions based on the cases. For further validation, large-scale quantitative studies are necessary.<br/><br>
<br/><br>
Practical Implications (if applicable)<br/><br>
We show that a three-part tariff in which the capacity risk is shared may lead to increased modal shift and hence assumed improved environmental performance. <br/><br>
<br/><br>
Social implications (if applicable)<br/><br>
Instead of arguing for operators to be more customer-focused, policy-makers and other stakeholders may have more to gain by having both actors being more cooperation-focused. <br/><br>
<br/><br>
Original/value<br/><br>
The paper is the first attempt to quantify how the contractual relations on the freight transport market affect the modal mix and thus the financial and environmental efficiency of freight transport.},
  author       = {Eng Larsson, Fredrik and Norrman, Andreas},
  issn         = {0960-0035},
  keyword      = {Green Logistics,Modal Shift,Intermodal Transportation,Contracting,Service Providers,Sustainability,Risk Sharing,Incentive Alignment},
  language     = {eng},
  number       = {10},
  pages        = {721--743},
  publisher    = {Emerald Group Publishing Limited},
  series       = {International Journal of Physical Distribution & Logistics Management},
  title        = {Modal Shift for Greener Logistics - Exploring the Role of the Contract},
  url          = {http://dx.doi.org/10.1108/IJPDLM-07-2013-0182},
  volume       = {44},
  year         = {2014},
}