Multimodal Transport of Flowers: Taiwan to Mainland China

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• Multimodal Transport of Flowers Taiwan to
  Mainland China
• AKC Beresford, C Zheng, SJ Pettit
• Transport and Shipping Research Group
• Cardiff Business School, Cardiff University
• International Association of Maritime Economists
  Conference
• 11th 14th July 2006
• Melbourne

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• MULTIMODAL TRANSPORT COST MODEL
• Traditional approaches to modal choice in
  logistics take a unimodal approach, e.g. McKinnon
• Attributes of one mode are weighed against those
  of another road v rail, sea v air.
• Beresford and Dubey, Beresford and Savides took
  multimodal approach MTO designs the chain
• Least cost, least time, least risk or other
  solutions may be obtained
• Cost v time, cost v distance, or time v distance
  can be modelled

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• MMT COST MODEL (Cont.)
• Classically, intermodal transfer is a cost step
• Ports, terminals, airports, consolidation
  centres, inland container depots
• Transport is a progress line with
  value-addition stemming only from cargo
  repositioning
• No real change of state of cargo
• Flatter transport line cheaper transport, per
  tonne / km
• Higher cost step more expensive intermodal
  transfer
• Model easily adapted to yield total logistics
  costs, cost/m3, cost/TEU, cost/tonne

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• MMT COST MODEL (Cont.)
• Model Origin Beresford Dubey (1990)
• Beresford Savides (1997)
• Beresford (1999)
• Beresford Banomyong (2001)
• Model now used by UN as an approach to evaluating
  multimodal transport chains
• UNESCAP (2003) Transit Transport
• Issues in Landlocked and Transit Developing
  Countries
• Trans-Asian landbridge routes and shipping
  alternatives
• Now available at www.unescap.org (2005)

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Background

• 2004
• Taiwans exports to China - US 2.9bn
• Taiwans imports from China - US 1.048bn
• (Taiwan Ministry of Economic Affairs)
• Large volumes especially westbound
• Relatively short distance, Taiwan Guandong
  province

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Background

• No direct sailings permitted between PRC and
  Taiwan
• Transhipment via 3rd party location required
• Hong Kong (HK) is a natural transhipment
  location
• Cargo handling charges at HK are high
• Overall transport costs via HK are therefore
  also high
• Multimodal transport solutions varied and
  imaginative in effort to keep costs down

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Case Study

• Transport of live plants
• Used to exemplify the commercial considerations
  in choosing routes and methods
• Cargoes crossing Taiwan Strait mainly primary
  products offering little or no opportunities for
  value addition
• Transport costs thus a major consideration in
  route planning
• Transhipment is time consuming

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Case Study

• In-transit inventory becomes costly with little
  or no chance to offset costs by improving cargo
• Producers and traders pressing for permission to
  route directly, but change unlikely
• Existing and potential routes explored
• Cost minimisation, time schedule control and
  service requirements considered together
• Core question Which routes offer greatest
  flexibility to meet commercial and service
  expectations

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Data Collection

• Major MMT operator serving the Taiwan PRC
  market provided data
• Company is global, fully connected to port
  terminals, Inland Container Depots, hauliers and
  feeder service providers
• Company has a good reputation for quality service
  provision
• Company provided both quantitative and
  qualitative information

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Data Collection

• Interviews used to gather data during July 2005
• Data providers
• importers, shipping lines, terminal operators
• road hauliers, feeder service operators
• Data variables
• route distances
• transport times
• Transport costs
• handling costs

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Modal Choice

• Starting point for Taiwan PRC trade
• Road / Water
• Water includes inland waterways and deep sea
• Suited to
• low value / high density cargo e.g. minerals,
  agricultural and forest products
• high value / high volume cargo e.g. flowers,
  plants, shrubs
• Water transport is low cost but slow, and
  requires pre- and post- transport

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Modal Choice

• Two types of water transport used
• deep sea container 1000 FEU for Taichung HK
• barges 40 FEU capacity for up-river movement
• Barges equipped with on-board temperature control

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Modal Choice

• Use of road transport gives
• accessibility, flexibility, speed, inventory
  savings
• Road option suffers from
• high unit costs, congestion, schedule
  uncertainty
• Cargoes must be sufficiently high value to
  justify and sustain high transport cost
• Classic speed vs. cost vs. inventory trade-offs

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Taiwan Flower Industry

• Tropical location
• Pacific rim
• 220 260N
• Warm / hot
• Varied geography
• Natural advantages for flowers / plant
  cultivation
• Rapid growth in exports to China 1989 2004
• Steady reduction in imports from China

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The Market

• Cultural links and booming Chinese economy
  pull factors
• Active promotion by Taiwan push factor
• Many buyers and sellers well linked esp. in
  Guangdong
• Largest centre Shunde (Flower World)
• 250 Taiwanese companies covering production and
  sales
• Buyers come from all over PRC

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The Product

• Big species e.g. palm trees for decoration /
  parks gardens
• Smaller species e.g. cacti for homes offices
• Cut flowers for festivals celebrations
• Species usually mixed in a container
• Fragile require in-transit care moisture and
  temp. control
• Delays not desirable
• reserve routes required
• accessibility problems
• Reliability and capability are key

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Carriers and Operators

• Taiwan Floriculture Export Assocn. (TFEA) is
  promotional body
• Freight forwarders play major role in mode, route
  and method selection
• Dominant current solution sea to HK. Truck to
  Flower World
• Several multimodal alternatives possible

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Routes and Modes
Source Authors O original routeing
Table 1 Multimodal transport routeings from
Taichung to Flower World
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Export

• Routeing is via Taichung, but via Kaoshiung
  could save time
• Transhipment via HK into south China via Shenzen
• 5 ferry terminals and frequent sailings offer
  alternatives
• Frequencies and speeds vary, but can fit
  requirements
• Mostly daily except Sundays

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Provisional Main Costs
Table 2. Transport Costs
Source Authors
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Existing Sea Road Route

• Pre carriage 100 km
• Taichung HK 688 nm (1273 km)
• HK Flower World 200 km
• Total time lt 7 days
• Total cost US 1472 / FEU
• Consignment shipped on day 3, arrival time in HK
  normally a.m. day 5
• Customs levies are high and bring risk of delays
• Road haulage and truck loading / unloading 14
  of distance, 40 of cost
• Re routeing therefore could reduce costs
  substantially

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Alternative Routes

• Competition between carriers and between routes
  could / should reduce costs
• Pearl River Delta (PRD) has numerous navigable
  rivers and ferry terminals
• Many existing feeder (ferry) services between HK
  and Shunde
• Distance / Time matrix shown in Table 3
• HK Zhongshan Flower World fastest solution
• Fastest not always best
• Road transport damages plants due to vibration
  and slewing
• Cost or time not therefore enough in service
  level evaluation

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Alternative Routes
Table 3. Distances and Transit Times from Hong
Kong to Flower World
Source Authors Note The average speed of a
container truck is assumed as 60km/hr.
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Existing Route
2
5
3
1
4
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Alternative Route 1

• Taichung - HK - Zhongshan - Flower World
• Sea Ferry Road
• Around 7 days total time
• Total cost 1215 per FEU
• 17 cheaper than current sea road solution

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Alternative Route 2

• Taichung HK LHS - Flower World
• Transhipment at HK
• Different ferry terminal, different schedule
• Total cost 1159 per FEU
• Less road transport, small time saving, 21
  cheaper than current route

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Alternative Route 3

• Taichung HK Leliu - Flower World
• Transhipment at HK but schedule too late for same
  day completion
• Overall time 8 days
• Main cargo on this route is logs plants used as
  make-up cargo on ferry
• Overall cost is 1209, cheaper than Alt. route 1
  but more than Alt. route 2

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Alternative Route 4

• Taichung HK Beijiao - Flower World
• Tight transhipment schedule
• Overall time 7 - 8 days
• Long ferry leg, short road haul
• Total cost 1137 per FEU
• Lowest total cost, slowest overall time schedule

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Alternative Route 5

• Taichung HK Pinzhou - Flower World
• Tight transhipment schedule
• Overall time 7 - 8 days
• Can be fastest overall and price competitive -
  1131
• Saving of 341 over current route (23)
• Tight schedule facilitated by advanced clearance
  links into customs network

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Route Analysis Summary

Distances and Costs from Hong Kong to Flower
World
Source Authors
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Route Analysis SummarySea Road Route

• Fastest but high transhipment and road haulage
  costs
• Road transport 43 of total cost
• Long clearance times
• Long road journey increases risk of damage
• Occasional road accidents
• Not simple time cost trade-off vis a vis
  sea-ferry alternative

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Route Analysis Summary
Cost Comparison between Sea-Road and Hong
Kong-Pinzhou routes

.
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Sea - Road versus Sea/Road/Ferry Combination
Pinzhou Route
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Route Analysis Summary

• Although via Pinzhou appears best, not always
  wise to use only one route
• Plants are high volume, medium value
• 500 containers / month Taiwan China
• use of more than one terminal reduces pressure
• competition / price brokering
• importers like to spread volume around to
  disguise flows
• Variable customs treatment encourages spreading
  of business

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Route Analysis Summary

• Business relationships / human factor , agency
  preferences contribute to route selection
• Overall cost and time very important, but other
  factors affect choice of route, method, carrier
  etc.

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Taichung vs Kaoshiung

• Taichung HK 688km
• Kaoshiung HK 343 km
• Sea freight same at 600
• Pricing by commodity / class, not distance
• Road haul, warehouse to
• Taichung - 105 (70km)
• Kaoshiung 361 (225km)
• Routeing via Taichung 1 day slower but 256
  cheaper
• Kaoshiung used at peak and provides discounts

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Conclusions

• Current cross strait restrictions between Taiwan
  PRC force route and mode choice
• Potential alternatives are available
• All alternative routes offer cost savings
• 3 alternatives also time competitive
• Peak season, slower, more expensive routes
  selected on other preference criteria
• Optimum multimodal transport solutions may not be
  cheapest, fastest or even most reliable but are
  a complex mix of these criteria