Source: Rodrigue and Roh (2008).

Functional Integration of Freight Distribution Clusters

The level of functional integration between the distribution activities located within a cluster varies from small where they simply share a location and its accessibility to significant where activities have a high level of integration. Thus, three major levels of functional integration can be found for freight distribution clusters:

• Logistic zones. The suburbanization of distribution centers (DC) resulted in the formation of various logistics zones where land is available and with proximity to major road infrastructure. They are often the outcome of zoning changes done by local governments implicitly defining an area for warehousing and freight distribution activities and giving the green light for private firms to develop their projects. However, those activities are commonly unrelated, implying that they have their own supply chains and distribution networks. Accessibility tends to be the main factor favoring agglomeration within the freight cluster. They are likely to appear rather spontaneously as several firms realize the advantage of a location for freight distribution centers.
• Logistic clusters. A concentration of freight related activities within a specific area, commonly built for such a purpose, master planned and managed. These activities include distribution centers, warehouses and storage areas, transport terminals, offices and other facilities supporting those activities, such as public utilities, parking space and even hotels and restaurants. Although a logistic cluster can be serviced by a single mode, intermodal facilities (rail terminal, port or airport) can offer direct access to global and regional markets. The development of logistic clusters has many benefits to manage the freight flows generated by several unrelated users through economies of scale since they are sharing the same facilities and equipment, mostly around a transport terminal or a depot. This in turn reduces transport costs and promotes its reliability. Various names have been used to label them, such as "freight villages". They are commonly the outcome of strategies of port authorities, regional governments or private terminal operators.
• Logistic poles. Has all the characteristic of a logistic cluster, but commonly implies a higher level of integration between the firms and distribution centers present within the pole as well as with transport terminals servicing the pole. This can also involve the setting of a free (foreign) trade zone (FTZ) within the pole, conferring an additional level of flexibility (and complexity) in freight distribution. A pole has a higher level of integration with intermodal terminals, let them be ports, rail yards or airports, resulting in an intermodal freight distribution system. In some cases of advanced supply chain management strategies, the terminal upstream of the supply chain can act as a storage buffer and functionally be part of the logistic pole. Logistic poles tend to be the outcome of a concerted action between high level government agencies and the private sector since regulatory changes are required as well as large scale infrastructure investments. They thus have a well established governance structure as well as a logistics service market that include education and training strategies to insure a productive labor force.

Freight distribution clusters can grow both in scale and scope. Although they can independently grow either in scale or scope, this process tends to be concomitant.