Types of Freight Facilities

Types of Freight Facilities

Freight facilities are punctual fixed infrastructures used to support freight transportation and have a wide variety of shapes, sizes, and functions. They serve a combination of three standard functions, each having a respective degree of importance:

  • Fabrication. Involves assembling goods out of parts, fabricating parts, or performing a task changing the physical characteristics of a good (packaging, labeling, etc.). This is usually a transformation-related function.
  • Storage. Holding goods in inventory for an extended period of time and releasing them on demand. This is usually a buffer related function and related to intermediate goods.
  • Distribution. Consolidating, deconsolidating, sorting a cargo load, or changing the load unit. This is usually a throughput related function involving final goods.

The main difference between the storage and distribution functions relates to the time the inventory is spending within the facility, usually less than a few days and less than 48 hours in high throughput facilities. Based on these three functions (fabrication, storage, and distribution), freight facilities are of five main types:

  • Manufacturing facilities. A pure fabrication facility is essentially considered as a factory, which is associated with a storage function. While the main purpose of manufacturing facilities is fabrication, light manufacturing systems are usually more integrated to supply chains (e.g. just-in-time inventory management), implying that they rely on distribution capabilities to effectively operate. This requires the goods to spend some time in the manufacturing plant’s warehouse, with some parts being stored before assembly. Heavy manufacturing tends to have more storage-based inventory management, mainly because of the ponderous characteristics of their inputs and outputs.
  • Terminal facilities. Terminal facilities are freight facilities as well. Outside their standard role of transferring cargo from one mode to another, they also act as a buffer in the transport chain with a significant storage function. While for a container terminal, this function is subject to dwell time considerations (usually less than 7 days for a port), for a bulk terminal, storage is part of the services offered by the facility and can last much longer. A transloading facility such as an automobile terminal is also highly storage-dependent. Therefore, terminal facilities are balancing the buffer and throughput functions with container terminals more throughput facilities, and bulk terminals more buffer facilities.
  • Storage facilities. The purpose of a storage facility is to hold inventory for a period of time. Bulk warehouses are usually single-purpose facilities for storing bulk materials (sometimes in break bulk forms such as stored in bags or drums) such as grain or fertilizers. Different types of storage models exist for a standard warehouse, such as racks and pallets, which are related to the goods they are storing. For instance, rack-supported warehouses are pure storage facilities with the rack system being the basic structural support for the building. They offer a high storage density along with a comparatively low land-use footprint, many of which are automated. The most general warehouse is the multitenant facility which is a general-purpose facility usually rented through short to medium term leases and where the tenant uses the facility depending on their respective supply chain requirements. When users reach a critical mass, they tend to build and operate their own facilities since they fit better their operational standards (custom-designed). Still, an active warehouse leasing market remains, and even large enterprises relying on it when it fits their strategies.
  • Distribution facilities. These facilities are more based on the concept of throughput of the inventory they carry, implying a much higher level of integration within supply chains. For instance, a distribution center temporarily holds the inventory for the market area its services, implying that some storage will take place, and on occasion light manufacturing activities will be performed such as inspection, packaging, labeling, and returns. Still, the main purpose of a distribution center is its ability to fulfill a variety of orders in a timely manner. A cross-docking distribution center is a good example of a pure distribution facility with no (or very little) storage function. Due to the perishable nature of many goods being shipped, such as food, cold storage facilities (mostly refrigerated warehouses) are jointly able to perform fabrication (e.g. packaging before final delivery) and distribution functions. The urban logistics depot is also a facility mostly focusing on distribution with the main purpose of deconsolidating cargo loads (mostly parcels) for urban deliveries (which are usually using adapted vehicles).
  • Parcel facilities. While parcel delivery services have been around for close to a century, the surge brought by the growth of e-commerce has expanded parcel facilities substantially to the point that many are solely dedicated to e-commerce supply chains. First, the e-fulfillment center is a facility designed to handle a large number of online orders to be mostly put in parcels. Such a facility is storage-based (holding a very high range of goods) but also relies on a high level of throughput because of the timely nature of online orders. Sortation centers, particularly large parcel hubs, are facilities designed on the cross-docking principle with the main purpose of sorting parcels to a wide array of destinations, usually as part of a hub-and-spoke distribution system. This applies to air cargo operations as well as for last-mile deliveries.

Consequently, there is a wide variety of freight facilities each servicing a specific role depending on the nature, operations, and constraints of the supply chains they are supporting.