What is modal shift? An introduction to the benefits and disadvantages, and examples of corporate initiatives

There are probably many company personnel who are concerned about logistics costs, labor shortages, and environmental problems. One thing that is attracting attention as a solution to such issues is modal shift.

Modal shift is an effort to switch from truck transportation to a mass transportation method such as railroad or marine vessels. This is highly effective in reducing CO2 emissions and easing the burden on drivers.

This article gives an easy-to-understand explanation of the benefits and disadvantages of modal shifts, and case examples of initiatives by companies.

Modal shift

Modal shift is to convert the transportation of cargo by trucks and other motor vehicles to a method of mass transportation such as railroads and marine vessels. It is a shift (conversion or transition) in the mode (means or method) of transportation.

With regards to mainly long-distance trunk line transportation, as truck transportation emits large amounts of CO2, switching from trucks to a means of transportation that places less burden on the environment can be expected to help protect the environment as well as alleviate driver shortages and reduce logistics costs. In recent years, a modal shift has attracted attention as a corporate CSR activity and as an initiative to achieve the SDGs, and it can be described as an important policy for the construction of sustainable logistics systems.

Benefits of modal shifts

Modal shifts offer a variety of benefits, from reduced environmental impact to lower costs. The four main benefits are as follows.

It is possible to reduce CO2 emissions

The greatest benefit of modal shift is a significant reduction of CO2 emissions. The Ministry of Land, Infrastructure, Transport and Tourism estimates that the CO2 emissions per ton-kilometer of cargo transportation are 207 grams for trucks, 19 grams for railroads, and 42 grams for marine vessels. This means that compared with using trucks, emissions can be suppressed to one eleventh by using railroads and to one fifth by using marine vessels. In other words, switching the means of transportation to railroad or marine vessel can reduce CO2 emissions by approximately 91% for railroad and 80% for marine vessels.

This reduction of environmental impact is also extremely important from the perspective of measures against global warming. In recent years, consideration for the environment in corporate activities has been strongly demanded as an important part of corporate social responsibility (CSR), and many companies are proceeding with a modal shift as a concrete measure to achieve this.

In particular, as there are demands for companies to achieve CO2 emission reduction targets, pursuing a modal shift in the logistics sector no doubt helps companies improve their brand value and win the trust of trading partners and consumers.

Reference: Environment: Carbon dioxide emissions in the transportation sector - Ministry of Land, Infrastructure, Transport and Tourism

It can help solve the issue of driver shortages

Modal shifts are also effective as a solution to the increasingly severe problem of truck driver shortages. As a result of the declining birthrate and aging of the population, and the decrease in the number of younger workers, the logistics industry as a whole is experiencing an accelerating situation of labor shortages. In long-distance trucking in particular, the burden on drivers is heavy because it is necessary to work long hours and drive overnight, and this makes it difficult to secure human resources.

In a modal shift that utilizes rail or a marine vessel, the driver only needs to be responsible for the short-distance transportation from the origin point to the nearest freight station or port, or from the arrival station or port to the final destination. This makes it possible to use the limited driver resources more efficiently, so another benefit is that it leads to an improved working environment for drivers.

The cost of long-distance transportation can be reduced

In long-distance transportation, a modal shift can be expected to reduce costs.

With truck transportation, labor and fuel costs increase proportionally to the distance driven. However, railroads and marine vessels can transport large volumes of cargo at a time, so the transportation cost per unit can be kept lower. For long-distance transportation of 500 km or more in particular, it is often necessary to secure break times for the truck driver, or to have a two-person crew, and this results in higher labor costs.

However, there are cases when a truck is more cost-effective for short-distance transportation, so before introducing a modal shift, it is essential to perform a cost estimation based on the transportation distances and freight volumes of your company.

It can contribute to the achievement of the SDGs

A modal shift also makes a significant contribution to the achievement of the SDGs (Sustainable Development Goals). In particular, it can be expected to have a direct impact on the achievement of the environment-related goals, such as "Goal 7: Affordable and Clean Energy," and "Goal 13: Climate Action.

In addition, a modal shift helps to improve the working environment for drivers and to ensure the sustainability of logistics, so it is an effort related to "Goal 8: Decent Work and Economic Growth." Promoting a modal shift as a corporate initiative for the environment and society leads to an improvement of the company image and an enhancement of the reputation of the company among investors, so it is also becoming increasingly important as a management strategy.

Issues and disadvantages of modal shifts

Modal shifts have many benefits, but it is also important to understand the issues and the disadvantages. Let's look at the five main issues here.

Transportation times increase

The biggest disadvantage of a modal shift is the increase in the time required for the transportation. Transportation by railroad or marine vessel requires time for the cargo delivery to and from the station or port used, time for reloading the cargo, and standby time to fit with the rail or ship timetables. These are not required for truck transportation.

Furthermore, as railroads and marine vessels only operate on predetermined routes and timetables, it is difficult to perform the flexible adjustment of transport times that is possible with trucks. This means that there will be many cases when the arrival time for the cargo is delayed. There will probably be cases where introducing a modal shift will be difficult, especially for urgent cargo, or when the delivery deadline is tight.

Work is needed to reload the cargo

With a modal shift, it is necessary to transship the cargo from the truck to the railroad car or marine vessel, and vice versa. This transshipment work requires labor and time, and in reality it is a factor that increases cargo handling costs. Also, depending on the characteristics of the cargo, it is not possible to ignore the risk that the cargo may be damaged during the transshipment.

Particular attention must be paid to the handling during the transshipment if the cargo is items such as precision equipment, fragile goods, or perishable foods that require temperature control. Depending on the type and nature of the cargo, there will be cases when a modal shift is not appropriate.

The cost is higher for short-distance transportation

A modal shift is effective for reducing the costs of long-distance transportation, but when the distance is short, it actually tends to increase the costs. This is because the fixed costs (base rates) for railroads and marine vessels are high, and also the cost of the transshipment operations is required.

In general, it is said that a modal shift is cost-effective when the transportation distance is approximately 500 km or more. In other words, the journey between Tokyo and Osaka (approximately 500 km) is the borderline case, and truck transportation tends to be more cost effective for distances shorter than that.

The transportation is susceptible to poor weather conditions

One characteristic of railroads and marine vessels is that they can easily be affected by the weather conditions. For marine transportation in particular, service suspensions and delays can often occur due to typhoons, strong winds, high waves, and other factors, so the reality is that there are issues in terms of service regularity. There is also an undeniable risk of rail transportation operations being disrupted by natural disasters such as heavy rain, heavy snow, or strong winds.

In contrast, truck transportation has the advantage of being relatively unaffected by the weather, and also that it is easy to find alternative routes. Transportation delays due to bad weather will have an impact on inventory management and production planning, so it is necessary to take measures from a risk management perspective.

There are higher risks from possible disaster events

In the event of a natural disaster, there is a risk that railroads and marine vessel services will take a long time to recover. If a railroad track is damaged, then the entire route can no longer operate, and if port facilities are damaged, marine vessels cannot be used.

There have been past cases where railroad lines have been disrupted for long periods of time due to a bridge being washed away by torrential rain or the railroad bed being displaced by an earthquake. From the perspective of business continuity planning (BCP) for disaster events, it is important to diversify risk by combining multiple modes of transportation rather than relying on a single mode. When promoting modal shift, be sure to also consider the securing of an alternative means of transportation in the event of a disaster.

Government initiatives to promote modal shift

The government has prepared various support measures and systems to promote modal shifts. Let's look at some of the major government initiatives related to modal shift promotion.

Comprehensive Physical Distribution Policy Outline (FY2021-FY2025)

The "Comprehensive Physical Distribution Policy Outline (FY2021-FY2025)" is a document that presents the basic policy for logistics. It was approved by the Cabinet in June 2021.

The document positioned modal shift as an important measure for the construction of a sustainable logistics network. It set the specific goals of increasing rail transportation from 18.4 billion ton-kilometers in FY2019 to 20.9 billion ton-kilometers in FY2025, and increasing marine transportation from 35.8 billion ton-kilometers in FY2019 to 38.9 billion ton-kilometers in FY2025.

As FY2025 is the final year in this plan, work has already begun on the next general plan. In March 2025, a study group was established on the Comprehensive Physical Distribution Policy Outline to run up to FY2030 and discussions are ongoing about this next policy period, which is positioned as a period of intensive reform of logistics innovation.

Reference: Logistics: Comprehensive Physical Distribution Policy Outline (FY2021-FY2025) - Ministry of Land, Infrastructure, Transport and Tourism

Medium- to Long-Term Government Plan up to FY2030

The "Medium- to Long-Term Government Plan up to FY2030" is a logistics policy plan that takes a longer-term perspective. It was formulated and published in February 2024. It is characterized by its focus on solving the issues for the logistics industry after the "2024 problem" (the introduction of truck driver overtime cap).

It is projected that there will be a 34% shortage of transportation capacity in FY2030, and this plan includes specific measures to promote a modal shift, such as the development of the hardware needed for the shift and the use of digital technology. In particular, it presents the policy of aiming to double the volume and share of cargo being transported on railroads and in coastal cargo transportation over the next ten years or so, and clearly positions modal shift at the core of logistics innovation.

Reference: Medium- to Long-Term Government Plan up to FY2030 (Key Points) | Ministry of Land, Infrastructure, Transport and Tourism

Modal Shift Promotion Project

The "Modal Shift Promotion Project" is a subsidy program to support the introduction of modal shifts by companies. The program is designed to subsidize a portion of the expenses required for modal shift initiatives by businesses that have an approved integration and streamlining plan based on the Act on Advancement of Integration and Streamlining of Distribution Business.

Specifically, the subsidy can be used for the expenses required to promote the use of railroads and marine vessels, the expenses required to introduce transportation equipment and machinery, and the expenses required to improve facilities at distribution centers. It is expected that using this subsidy will reduce the initial investment burden for modal shift and promote the initiatives.

Reference: Logistics: Modal Shift Promotion Project - Ministry of Land, Infrastructure, Transport and Tourism

Full Support Measures for a New Modal Shift

The "Full Support Measures for a New Modal Shift" is a policy document that was released in November 2024. It outlines concrete measures that are specifically for modal shift. It is characterized by its positioning as an implementation measure to better ensure the elimination of the 34% shortage of transportation capacity that is expected in FY2030.

The full support measures indicate three directions to be taken: (1) the further strengthening of efforts for modal shifts to rail and coastal shipping, (2) the utilization of a variety of transportation modes, and (3) coordination with local industrial policies and regional policies, etc. Specifically, it includes measures such as the widening of railroad container platforms and railroad bed reinforcement, the consolidation of small-lot cargo, and the promotion of palletization. It is attracting attention as a plan for action up to 2030.

Reference: Press release: Publication of the "Measures for New Modal Shifts" compiled by the Modal Shift Promotion and Standardization Subcommittee of the Public-Private Logistics Standardization Conference - Ministry of Land, Infrastructure, Transport and Tourism

Examples of companies working on a modal shift

Many companies have actively pursued a modal shift and realized both a reduced environmental impact and reduced costs. The following are examples of companies implementing distinctive initiatives.

Yamato Transport reduced its truck transportation by the equivalent of 2,300 trucks per year by switching to rail for trunk line transportation between Kyushu and Kanto, which had previously been mainly by truck. This not only realized a significant reduction of CO2 emissions, but also led to shorter driving time for the drivers. This initiative also received an award from the Japan Association for Logistics and Transport, and attracted attention as an industry-leading example.

Reference: Yamato Transport Receives the Modal Shift Excellent Business Grand Prize Award | Yamato Holdings Co., Ltd.

There have also been an increasing number of cases at beverage and paper manufacturers where multiple companies cooperate to utilize railroads and RORO vessels (ships that transport the entire chassis loaded with the cargo). For example, in one case, four beer breweries jointly switched to marine transportation between the Kanto and Kansai regions. This realized significant effects for both the environment and efficiency, including around a 59% reduction in CO2 emissions and a 77% reduction in the hours of driving by drivers.

Reference: Cases related to modal shift (from cases approved under the Act on Advancement of Integration and Streamlining of Distribution Business)

As in these cases, modal shift goes beyond a simple change of transportation method. Collaboration among multiple companies and the introduction of new transportation schemes are also contributing to the solution of various issues such as the reduction of environmental impact, addressing the shortage of drivers, and optimizing logistics costs.

Summary

Modal shift is an initiative that brings many benefits, including reduced environmental impact, the elimination of driver shortages, and cost savings for long-distance transportation. On the other hand, there are also issues for modal shift, such as longer transportation times, the need for cargo transshipment work, and cost increases in the case of short-distance transportation.

The number of successful examples at companies is steadily increasing, and it is expected that the technological innovations and growing recognition in society will mean that modal shift initiatives continue to expand from now on. As we work towards the construction of sustainable logistics systems, how about reviewing the transportation systems at your own company and considering the possibility of modal shift?

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