The Space / Cost Dichotomy of Forelands and Hinterlands

The Space Cost Dichotomy of Forelands and Hinterlands

Depending on if space (distance) or cost is considered, the relative importance of the hinterland significantly changes. For instance, when international transport chains are considered (such as trade between Asia and Europe or North America), foreland distance (maritime shipping) commonly accounts for 90% of the total distance while hinterland distance (rail, barge, and truck combination) accounts for the remaining 10%. From this distance perspective, the hinterland appears to be a relatively marginal concern as a large share of the distance is covered by maritime shipping.

However, from a cost perspective, the relation is the opposite, thus the dichotomy. Maritime shipping has achieved remarkable economies of scale, underlining its ability to transport cargo over long distances and at a low unit cost. Economies of scale are much more difficult to achieve over the hinterland, and as traffic increases, transport networks near ports are getting increasingly congested. Hinterland transportation accounts for a dominant share (about 80%) of the total transport cost, while maritime shipping accounts for the remaining 20%. Therefore, hinterland transportation remains one of the most salient issues in long-distance freight distribution.