The purpose of this report is to compile and assess the research and knowledge base with regards to what determines the choice of mode from a business perspective. The literature review is based on grey research and scientific articles within transport economics and logistics.
The literature identifies a range of factors that can potentially affect the decision-makers in their choice of transport mode. The factors that are reviewed in this survey are those that commonly occur within the literature and often deemed the most relevant.
First, the influence of shipment attributes (value, damage sensitivity, time sensitivity, weight, density and volume) and transport distance are discussed. Surveys and behavioural studies show how the competitiveness of the transport modes depend on shipment attributes and transport distance. For certain shipments, the distance class and commodity type are such that it is only realistic to use a specific mode. Other factors that usually matter for the choice of mode will have little impact on the choice. The exact size of the contestable market is hard to measure, but it is likely that for a significant part of the goods flows on the freight transport market it is only realistic to use one specific transport mode.
Second, the review analyses how the choice of mode is influenced by modal characteristics (transport cost, transport time, reliability, shipment frequency and damage risk). The importance of these characteristics vary across decision-makers, partly according to transport distance and commodity class, but is generally relatively low. In other words, the propensity to switch transport mode as modal characteristics change is relatively low. This may be due to the effects only measuring the impact in the short and medium term, that they are based on changes in a single factor holding other determinants constant or that the analysis miss how decision-makers actually weigh in modal characteristics in their choice of transport mode.
Third, the review discusses how the firms’ choice of distribution and production strategies entails possibilities and limits for its choice of transport mode. This analysis identifies multiple factors that tend to facilitate the choice of multimodal transport chains and direct rail or sea transports. These factors mitigate the effect of multimodal transports’ disadvantages or facilitate the utilization of its advantages. Generally, this entails promoting shipments of larger volumes and economies of scale that can be utilized by rail and sea transports.
Fourth, the transport contract and the relationship between buyers and sellers of transport services are investigated. The contract can facilitate or limit the choice of transport mode by distributing risk and limit the way the firms can perform their operations. A close cooperation between transport buyers and transport companies can make the parties more aware of this possibilities and problems that the transport solution entails.