Executive Summary
This report examines the concept of the Freight village and considers its
applicability in the Delhi-Mumbai Industrial Corridor. On the whole, there has
been a dramatic increase in the amount of freight transported around the world
(global containerization has increased five-fold between 2008 to 2018) and the
associated movements have had a considerable impact at metropolitan and even
more localized levels as goods make their way through the supply chain.
There are a variety of reasons why more goods are flowing. Clearly, there has been
a shift of manufacturing to Asia where it can be done more cheaply but reductions
in transport costs from containerization have played a substantial role in making
these flows possible. The rise of just-in-time production has led to lean inventories
and larger numbers of discrete shipments. As supply chains have become more
sophisticated there is more intermodal transport and more expertise dedicated in
the form of 3rd and 4th party logistics to maximizing efficiency. There is more
specialization and, as a result, more outsourcing is taking place.
In the movement of freight, it is natural for clusters of freight-related activities to
spatially concentrate. Within a larger freight cluster there may be particular nodes
that develop and which are highly freight- oriented. These are generally referred to
as logistics centres and are associated with a variety of names and contexts. A
freight village is a particular realization of a logistics centre.
Classifying Logistics Centres: A wide array of names have been used to refer to
different versions of logistics centres. These include: distribution centre, dry port,
inland port, load centre, logistics node, gateway, freight village and several others.
The review of the literature in this regard suggests some confusion and a lack of
standardized terms of reference. Reasons for this confusion include that intermodal
logistics is a relatively new field and logistics itself has evolved rapidly with fast-
changing technology. Also, the regional effect remains fundamental. Issues such as
modal availability, market function and intensity, regulation and governance create
unique circumstances by jurisdiction.
Elements of a Freight Village: Having positioned freight villages within the
general hierarchy of logistics centres, it is important to dig deeper into what freight
villages are and how they function. One useful definition suggests the following
key aspects:
a localized cluster of transport and logistics facilities which are
co-located and coordinated for synergies;
among the facilities is an intermodal terminal located near
container storage, handling areas and warehouses linked to rail to
reduce cargo handling costs and time and reduce the use of roads
for containers;
access to shared facilities, equipment and services (e.g. customs
services, truck cleaning, post office, conference and training
facilities and other services and amenities);
centralized management and ownership structure for long term
planning, investment, governance, environmental management
and other issues.
Of these four main points, the latter two are most powerful in differentiating
freight villages from other logistics centres on the hierarchy. The concept of
"shared access" is fundamental to the point where a freight village acts as an
incubator for small and medium size firms. A freight village can raise the
likelihood that smaller firms utilize intermodal transport. The list of potential
shared services is potentially very large and can range from those associated
strictly with the movement of goods to those associated with serving either the
employee base or a nearby residential population. For example, daycare and
restaurants can be part of the mix in certain circumstances.
Centralized management is important because there is very much the concept that
the whole is more than the sum of its parts. Certainly, participating private entities
inside the freight village will do their own planning and management to stay viable
but the freight village itself has a strong identity and its own brand that must be
strategically managed.
Potential Benefits of a Freight Village: On the benefits side, most have to do
with synergies, efficiency, improved economies of scale and sharing. The freight
village concept promotes synergies in logistics processes and synergies in
infrastructure (e.g. connections to networks, transshipment equipment, railway
sidings etc.) and an overall reduction in wasted movements since there is potential
to internalize intermediate moves. With regard to economies of scale, a freight
village leads to the assembly of a large amount of transport knowledge and know-
how at one location. Potentially, this knowledge can be pooled in the management
company to help benefit smaller tenants. Such pooling can also help on the
marketing side since smaller companies can benefit from the overall message of
the development. The concept can lead to fewer transportation links in the supply
chain but those that remain are of a higher quality.
Potential Shortcomings of a Freight Village: With regard to shortcomings, most
of the criticisms of the freight village concept amount to issues surrounding co-
ordination between actors. For public sector actors, there can be co-ordination
difficulties between different levels of government and conflicting political
interests. There can be risks of oversupply as every jurisdiction is anxious to
pursue the latest trend. Due to the presence of large rail operators in India, this
latter risk may be less here than in Europe. On the private sector side, there is the
reality that modern day supply chains are quite vertically-oriented whereas the
freight village concept is inherently horizontal and, in its ideal form, at least
partially depends on co-operation among firms. In many freight villages, firms
have been observed to operate completely independently of other firms in the
development.
Freight Villages along Delhi Mumbai Industrial Corridor: Efforts to tie the
freight village concept back to the Delhi Mumbai Industrial Corridor involve a
high-level overview of existing freight clusters within the province. In particular,
an analysis with the Indian Business Patterns database is carried out at the census
division level across sectors of the economy most associated with the generation
and movement of goods. The primary data source is business count data with an
estimate of the employee count by business and a detailed sectoral classification of
the firm.
A freight village is a complex and large undertaking where the elements of a
compelling vision, master planning, financing, land assembly, extensive public and
private co-operation and good timing have to come together all at once. There
needs to be a strong latent or forecast demand to drive activity at the freight village
and there needs to be a high comfort level that the large amounts of land required
will be getting put to their highest and best use. The presence of an intermodal
facility is one strong indication that a freight village development is such a use.
Meanwhile, goods movement cannot be considered in isolation when issues such
as residential sprawl and associated congestion effects threaten to undermine
progress on the goods movement front.
