Modal shift for greener logistics − exploring the role of the contract

Abstract

Purpose

The purpose of this paper is to investigate 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. The paper shows 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 release this dead lock.

Research limitations/implications

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

Practical implications

The paper shows 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

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

Originality/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.

Citation

Eng-Larsson, F. and Norrman, A. (2014), "Modal shift for greener logistics − exploring the role of the contract", International Journal of Physical Distribution & Logistics Management, Vol. 44 No. 10, pp. 721-743. https://doi.org/10.1108/IJPDLM-07-2013-0182