A Method to Model Freight Logistics Network for Policy Analysis: An Application to Estimate European Ports’ Intermodal Logistics Network

Freight logistics networks are an important element of the freight transportation system for they structure the routing patterns of commodities. Companies adapt their networks in order to minimize costs, which in turn can result in changes in the location of distribution centers (DCs), distribution networks formed, and ultimately the combination of modes of transport used. While the need of logistics models for policy analysis has been acknowledged (i.e. to assess the extent the spatial pattern of freight supply chain network would evolve), there have not been, unfortunately, many models developed to serve this purpose. In this paper, the authors present a strategic policy analytic model of the European freight distribution network. A novel approach using multi-stage logistics network model is developed to: 1) approximate the locations of the distribution centers in Europe 2) approximate the supply patterns from the Seaports to the distribution centers and from the distribution centers to the consumption regions. The model is based on a multi-objective optimization approach in which the trade-off between total logistics costs and demand coverage is studied to derive an approximation on the (aggregated) European distribution network. The network consists of 1439 regions, 121 ports, and 275 potential DC locations. The authors calibrated the model using observed number of DCs’ establishments and have demonstrated a satisfactory explanatory power of the model. Policy analysis exercises on European intermodal freight flows can make use of this model to find robust recommendations in dealing with uncertainties caused by changes in inter-regional trade pattern.