Background Research Material for Freight Facility Location Selection: A Guide for Public Officials (NCFRP Report 13) (2011)

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27 Freight Logistics Facility Types 4.1 Overview There are multiple classes of facilities which interact with freight at multiple points along the supply chain. Each of these fulfills a different role in moving goods from the point of production through final distribution to the consumer. Since each of these have different location needs and development issues, it is worthwhile to understand the functions housed in each, and the role that it performs in the supply chain. The following discussion thus provides a typology of freight logistics facilities with sub-classes of freight facilities highlighted. These represent facilities whose primary purpose is freight logistics rather than all generators of goods movement (which would also include manufacturing companies, for example). Information for this chapter was gained through interviews with private freight facility owners, users, and their consultants. 4.2 Distribution Centers (DC) Distribution Centers take several forms, but all fill the role of storing and facilitating the movement of goods to their final consumption zones. They are owned, developed and operated by private sector firms. A distribution center is a large, specialized facility, often with refrigeration or air conditioning, where products (goods) are held and assembled into deliveries to retailers, wholesalers or directly to consumers. A distribution center is a principal part, the "order processing" element, of the entire "order fulfillment" process, and as such some major firms (such as eRetailers) refer to them as “fulfillment centers.” Frequently operated by a single company as a point in its supply chain, most DCs are linked to a geographic service region but some have custom purposes, such as the handling of urgent goods or imports. DCs perform staging, consolidation, and unitizing functions, can be involved in final stage manufacturing (such as packaging and labeling of goods), and may double as an operating terminal for an associated truck fleet.  Warehouse  - In contemporary parlance, warehouses are a less elaborate form of distribution center, focused simply on the storage of goods or merchandise. They may be multiuser facilities owned by a third party with portions leased by supply chain customers (who may then view their portions as DCs), or places for storage services offered by truck lines or household goods carriers, or inventory holding points for manufacturers or traders. Cross-Dock 4.3 Port – A staging facility where inbound items are not received into stock, but rather are prepared for shipment to another location or to retail stores. Cross docking bypasses put-away and retrieval steps, dispenses with storage, and focuses on reconfiguration and consolidation of goods for further distribution (e.g., from a container to small-medium sized truck shipments). It also can create a pivot point for changing the specific destination of goods in transit. In foreign trade, cross-docks may involve container loading or stripping. Ports and their subtypes form key centers for the importing and exporting of goods via air or water and provide interfaces to rail and road. Ports are often developed and operated by a mix of public, quasi-public and private sector organizations. A port is a place serving as a harbor, airport, or point of entry and exit for incoming and outgoing shipments. Most commonly referring to air and seaports engaged in foreign and domestic trade, the term also embraces

28 points along rivers, canals and lakes, as well as land gateways straddling national borders. Ports may have berths or hangars for vessels or aircraft, terminals and warehouses for the management of goods, staging and access areas, and Customs facilities for the handling of foreign trade. Ports may specialize in certain types of cargo, such as containers, petroleum, bulk products, or automobiles, and they may also be military facilities. A load center is a seaport engaged in container trade that acts as a high volume transfer point for goods moving long distances inland, as well providing service to its regional hinterland. Two sub-categories of ports include:  Foreign Trade Zone (FTZ)  – A geographic area, in or adjacent to international ports, where commercial merchandise receives the same Customs treatment it would if it were outside the commerce of the United States. FTZs are designed to lower the costs of U.S.-based operations engaged in international trade and thereby create and retain opportunities that result from those operations. Typically containing warehouses and/or distribution centers, they operate under the supervision of the U.S. Customs and Border Protection agency. Inland Port 4.4 Intermodal Terminals - A physical site located away from traditional coastal or land borders with the purpose of facilitating and processing international trade through multi-modal transportation assets and typically offering value-added services as goods movement through the supply chain. Inland ports may feature FTZs, accommodating shipments moved inland in bond. They are often developed inland on large-scale properties responding to congestion and scarcity of land near coastal ports. Intermodal terminals – in the purest definition – include freight facilities that allow for the movement of truck trailers and marine or air containers between modes (e.g., road and rail, rail and maritime, road and air). They exist either because of physical requirements, such as the need to transfer between ocean-going vessels and inland transport, or to take advantage of the service, economic or environmental efficiencies of one mode for long haul movement, and the speed and reach of trucks for local pick-up and delivery. Perhaps most commonly, intermodal terminals refer to rail-owned facilities for rail-truck interface of containers. Increasingly, the public sector is becoming a participant in the funding and/or development of intermodal terminals. 4.5 Bulk or Transload Terminal A receiving and distributing facility for lumber, grain, concrete, petroleum, aggregates and other products is referred to as a bulk or transload facility. These support the direct or indirect transfer of goods between the carrying equipment of different modes. Transload terminals are distinguished because of their transfer of the goods themselves rather than of the equipment that bears them. Physical features may include storage tanks and areas, cranes or bulk transfer machinery, warehouses, railroad sidings, truck loading racks, and related elements. These freight facilities are typically owned, developed and operated by private sector freight businesses such as railroads and often involve the transfer of bulk goods from rail cars to trucks.  Auto Terminal – A transload facility for finished motor vehicles moving between ocean-going vessels, railcars, and truck trailers. Vehicles are driven under their own power between carrier equipment, and thus the goods themselves are the objects of intermodal transfer. Facilities typically require substantial amounts of parking and movement space for the storage and safe staging of vehicles, and have particularly high security requirements.

29 4.6 Integrated Logistics Center (ILC) A relatively new development type, Integrated Logistics Centers are industrial parks specifically constructed around high performance freight servicing facilities. Known also as freight villages, there is frequently substantial multi-modal freight infrastructure at these facilities such as an intermodal or hub terminal at their heart. ILCs include a full portfolio of activities relating to transport, logistics and the distribution of goods, both for national and international transit, offered by various operators. Assembly and manufacturing operations are accommodated alongside distribution, and the latter may include such specialized functions as parts banks, that require immediate access to non-stop linehaul transport. ILCs are claimed as examples of “Smart Growth” for manufacturing and logistics, because their economies of density and scope support precise and efficient logistics within a concise community and environmental footprint. 4.7 Hub Terminal Hub terminals are carrier operating facilities whose principal function is the intramodal resorting and reconsolidation of inbound into outbound load sets for continuation in intercity linehaul. Hubs are central points, marshalling volumes to and from city terminals in a home region, and between hubs in other regions. They are typically large acreage facilities processing a high number of vehicles, and in the case of national hubs (as are used in air freight) the land and building requirements are very extensive. In Less Than Truckload (LTL) trucking, a hub is a cross dock operation transferring goods from trailers at inbound dock doors to others at outbound doors. In small package trucking and mail, sorting and conveyor machinery are used in the transfer; a comparable sorting system is used in air freight, except that aircraft and air containers take the place of trailers. In railroading, the terminal is called a classification yard, the yard consists of sets of inbound and outbound tracks, and the transfer is of railcars from arriving to departing road trains. For intermodal trains, the transfer can be of trailers and containers from a railcar on one train to that on another, as well as of railcars between trains. Hubs may also serve a city terminal function for local freight, and may incorporate dispatch, driver services, equipment maintenance, and equipment storage. 4.8 City Terminal A city terminal is a carrier operating facility whose chief functions are:  Intramodal sorting and consolidation of load sets between intercity linehaul and local pickup and delivery, and  Management of pickup and delivery services to customers. City terminals are end points handling traffic within a metropolitan area and between that area and its hub. Acreage and vehicle volumes for most facilities are moderate but correspond to market size; carriers in big cites may have one major terminal or a few smaller ones. In LTL carriage, the operations involve cross dock transfers, at varying scales, of goods between smaller city and larger linehaul trucks; for small package and mail, sorting equipment may be utilized; and in air freight, the transfers are between city vehicles and air containers carried inside trucks. In railroading, the terminal is called an industrial yard, and the transfer is of railcars between tracks for local and intercity road trains. Management by local dispatching of pickup and delivery to customers and of related equipment pools is a crucial role that causes city terminals to be sometimes called service centers. Private truck fleets frequently perform this function out of their parent company’s distribution centers, where the load assembly is performed as part of customer order fulfillment (and the principal service is limited to delivery, not pickup). Bulk truck fleets rarely use city terminals for load transfer and instead utilize them for customer service and the cleaning and maintenance of equipment between loads. Equipment storage and maintenance are common at city terminals, as are driver services and

30 a usually limited amount of goods and load storage for customer and operating convenience. Finally, city terminals occasionally have a mixed character: some act as mini-hubs, staging loads between small town terminals and major hubs, and others located on airport property act as intermodal terminals, transferring containers to and from aircraft.  Drop Yard 4.9 Facility Type and Siting Decisions - A site used by carriers for equipment storage and load staging, but with no transfer of goods. A less elaborate form of city terminal and sometimes with lighter security requirements, a drop yard can be as simple as a fenced parking lot with perhaps an office trailer. Used by truckload carriers, they are handoff points between local and intercity drivers – ordinarily to improve scheduling efficiency – and are servicing points for customer equipment pools. Used by overseas shipping lines, railroads and equipment owners, they are called container yards and fulfill two purposes: the storage and management of containers and chassis, and staging between vessels, trains, and groundside customers. Yards may have local dispatching and some driver services, and may offer or support equipment maintenance. Freight logistics facilities of each type tend to be established and utilized by one of two principal parties in logistics operations: either the supply chain company (commonly referred to as a shipper, although they also or instead may be a receiver of goods), or the freight carrier. The preceding description of types discussed the chief parties involved and the purposes the facility serves for them. The table “Site Selectors by Facility Type” summarizes this information and serves two purposes: it identifies the kind of logistics company that will drive the site location decision for each form of facility, and it identifies the forms of facility each kind of logistics company will use. The categories “shipper” and “carrier” are broad, and there are several nuances that should be highlighted:  Many shippers – especially those engaged in or serving the retail trade – are operators of private truck fleets (and occasionally other fleet modes). In the table, they are carriers in this respect and the facilities they establish facilitate this carriage. In practice, these facilities may serve dual purposes: as noted above, the city terminal for a private fleet may be run out of the parent company’s distribution center.  Warehouses may be erected and run by private developers, who lease their properties to supply chain companies. In the table, these companies are functioning as shippers, because their facilities are designed to meet needs in the supply chain market. Similarly, a third party logistics company (3PL) that makes distribution decisions on behalf of a supply chain client is acting as a shipper.  Most ports have arisen as a consequence of natural geography. “New” ones mainly are larger developments constructed on an existing site. For these facilities, it is less a question of where to put them as which ones to invest in and use. The port itself typically is a public entity that either may operate or (more commonly) lease out the terminal logistics functions. However, like a property developer hoping to appeal to shippers, the port is appealing to its customers, and the “site” selection equates to a decision by customers to use it. Thus in the table, the decision makers are the shippers and carriers (such as a ship line) who elect to utilize the facility. Inland ports and FTZs are subject to greater choice in location, yet they usually involve public entities cooperating with private ones, and their purpose is to appeal to users.

31  Integrated Logistics Centers (ILCs) are hybrid developments, surrounding a core transportation terminal with industrial facilities. Consequently, they are designed for and are selected by both carriers and shippers. Table 4-1: Typical Operators by Facility Type Facility Type Shipper Carrier Supply chain economy in service to market Network economy in service to shipper Distribution Center  Port   Intermodal Terminal  Transload terminal  ILC   Hub Terminal  City Terminal  The operating mission that drives site selection for both shippers and carriers first and foremost provides service to clientele: for shippers, they are customers in the market for goods, and for carriers, the clientele are the shippers themselves. In the provision of service, both parties also are intent on economical design in their operating systems, assuring high performance at low cost. The decision factors they then employ to determine site preferences are complex, and priorities differ by the kind of facility. The table “Site Selection Criteria by Facility Type” identifies such differences across ten components to the location decision. These components and the process that utilizes them are examined in the next chapter.