Terminal Costs

Terminal Costs

Transport costs can be simplified as a linear function for three modes; road, rail, and maritime. This function only considers the cost of loading and transport to the destination, but not unloading and backhaul moves. It notably applies to freight, but passenger transportation depicts similar patterns, although maritime is not a common option outside ferries.

The cost functions all begin at some point up the cost axis, representing terminal costs. Because of different terminal costs, maritime shipping (T3; port costs) and rail (T2; yard costs) have significant disadvantages compared to road (T1; loading) over short distances. This implies that road transportation is at an advantage over short distances because of its low terminal costs, while the maritime option begins to be viable over much longer distances. Although road, rail, and maritime can be perceived as competing, they are usually more complementary since last mile (or first mile) segments usually need to be performed by road.