Transport, Logistics And Global Production Networks


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  • I would like to thank Johan Woxenius and the Chalmers University of Technology for inviting me to give this presentation.
  • Transport, Logistics And Global Production Networks

    1. 1. Transport, Logistics and Global Production Networks: A Geographical Perspective Jean-Paul Rodrigue, Hofstra University, New York “ There’s no business like flow business” Email: Paper available at:
    2. 2. Introduction <ul><li>Geography and logistics </li></ul><ul><li>Global Production Networks </li></ul><ul><li>Macro-economics and global freight distribution </li></ul><ul><li>Integrated transport systems </li></ul><ul><li>Corridors and distribution clusters </li></ul>
    3. 3. Introduction <ul><li>So, what about geography and logistics? </li></ul><ul><ul><li>The same problem seen from a different perspective: </li></ul></ul><ul><ul><ul><li>Geographers: marginal in a field dominated by engineers and economists. </li></ul></ul></ul><ul><ul><li>Engineering: the physical reality of freight distribution: </li></ul></ul><ul><ul><ul><li>Infrastructures (construction, maintenance, upgrade). </li></ul></ul></ul><ul><ul><ul><li>Technologies (innovations, technical improvements). </li></ul></ul></ul><ul><ul><ul><li>Organization (managing flows; scheduling, timing). </li></ul></ul></ul><ul><ul><li>Geography: the spatial reality of freight distribution: </li></ul></ul><ul><ul><ul><li>Locations (accessibility, gateways / hubs, comparative advantages). </li></ul></ul></ul><ul><ul><ul><li>Networks (transport links; modes and terminals) </li></ul></ul></ul><ul><ul><ul><li>Flows (relationships and complementarity). </li></ul></ul></ul>
    4. 4. Transportation and the Mobility of Passengers and Freight Intensity Distance Passengers Commuting Shopping Recreation Business Tourism Migration Waste disposal Local distribution Trade Energy & Raw Materials Commodity Chains Freight
    5. 5. Introduction <ul><li>Supply chain trends </li></ul><ul><ul><li>Disintermediation: </li></ul></ul><ul><ul><ul><li>Higher level of competition for parts, finished goods and logistical services. </li></ul></ul></ul><ul><ul><li>Migration: </li></ul></ul><ul><ul><ul><li>More and more activities “climbing up the supply chain” to be relocated in low cost locations. </li></ul></ul></ul><ul><ul><ul><li>Geographical process. </li></ul></ul></ul><ul><ul><li>Macro-economic impacts: </li></ul></ul><ul><ul><ul><li>Lower employment opportunities & potential high transportation costs. </li></ul></ul></ul><ul><ul><ul><li>“ Let them sweat and let us think”? </li></ul></ul></ul>Manufacturer Wholesaler Retailer Consumer Physical flow Information flow Wholesaler Retailer Consumer DC Manufacturer Suppliers DC Supply Chain
    6. 6. Fragmentation of the Production System and the Logistics Industry Inputs Outputs Factory Region A Region A Region B Region C Conventional Emerging Distribution Logistics
    7. 7. APL Logistics Freight Distribution Center, Shenzhen, PRC, December 2005
    8. 8. Box Label at the APL Distribution Center Kenneth Cole Productions (designer) Largest apparel store chain in the US Spring 2006 fashion
    9. 9. Costs of a Shoe Sold $100 in the United States and Made in China Factory Shoe Company
    10. 10. Container Waiting to be Loaded, APL DC - Shenzhen
    11. 11. Entry Gate, Port of Yantian, Shenzhen
    12. 12. Container Assembly Yard, Yantian Port
    13. 13. Containership Loading Management System
    14. 14. Loading a Post-Panamax Containership
    15. 15. TJ Maxx Main Distribution Centers Evansville Charlotte Pittston Worcester Las Vegas LA / LB Oakland Seattle / Tacoma Landbridge (double-stack) Chicago
    16. 16. Corwith BNSF Intermodal Rail Yard, Chicago
    17. 17. Global Production Networks: A Synopsis Global Production Networks Right Product Right Quantity Right Price Right Location Right Time Supply Demand Space Goods Links/Flows
    18. 18. Paradigms of Global Production Networks Region Rent / Value (Creation, Enhancement, Capture) Market Potential (expand) Production Costs (lower) Downward Upward Commodity Chain Functional Integration Geographical Integration
    19. 19. Paradigms of Global Production Networks <ul><li>Optimal market potential (upward move) </li></ul><ul><ul><li>New markets, improved products or more efficient and timely retail distribution. </li></ul></ul><ul><ul><li>Growth of global retailing and marketing: </li></ul></ul><ul><ul><ul><li>Many products (e.g. technical goods and apparels) have an international reach and recognition. </li></ul></ul></ul><ul><li>Optimal production costs (downward move) </li></ul><ul><ul><li>Lowest production cost possible in view of global differences in comparative advantages. </li></ul></ul><ul><ul><li>Move of labor intensive components of the commodity chain (more technical complexity recently). </li></ul></ul><ul><ul><li>Fragmentation of GPNs through a spatial division of production (FDI). </li></ul></ul>
    20. 20. Geographical and Functional Integration Functional Integration Geographical Integration S M D D S M M S Origin / Destination Relationships 1 2 3 4 S M D Supply / Demand Relationships Information Flows Physical Flows Supplying Manufacturing Distribution S M D “ Principle of Flow” “ Principle of Location”
    21. 21. National Semiconductors, Supply Chain, 1993, 2001, 2005 Wafer Fabrication Assembly & Testing Distribution Center South Portland (Maine) Salt Lake City (UT) Santa Clara (CA) Arlington (TX) Greenock (Scotland) Migdal Haemek (Israel) Cebu (Philippines) Bangkok (Thailand) Penang (Malaysia) Melaka (Malaysia) Toa Payoh (Singapore) Santa Clara Swindon (UK) Tokyo Hong Kong South Portland Regional Distribution Centers (1993) South Portland (Maine) Salt Lake City (UT) Santa Clara (CA) Arlington (TX) Greenock (Scotland) Cebu (Philippines) Bangkok (Thailand) Penang (Malaysia) Melaka (Malaysia) Toa Payoh (Singapore) Global Distribution Center (2001) Singapore (GDC) Singapore (GDC) South Portland (Maine) Arlington (TX) Greenock (Scotland) Supply Chain Rationalization (2005) Suzhou (China) Melaka (Malaysia) Toa Payoh (Singapore) Customers
    22. 22. Macro-Economics and Global Freight Distribution <ul><li>Serious imbalances </li></ul><ul><ul><li>Comparative advantages (global labor arbitrage). </li></ul></ul><ul><ul><li>Financial schemes (perpetual motion machine). </li></ul></ul><ul><ul><li>Separation between production and consumption. </li></ul></ul><ul><ul><li>Divergence in the geography of passengers and freight. </li></ul></ul><ul><ul><li>Containerized trade. </li></ul></ul>
    23. 23. World’s 10 Largest Exporters and Importers, 2004
    24. 24. The Global Labor Cost Arbitrage: Hourly Cost of Wages and Benefits, 2004 ($US)
    25. 25. The “Perpetual Motion” Machine: The Real Dynamics behind the World’s Most Significant Trade Relationship Goods Bonds (IOUs) Asset Inflation Debt Reserves Interest Rates Unemployment $ for goods $ for bonds United States China USD USD Borrowing Investment
    26. 26. Traffic at the 50 Largest Container Ports, 2003
    27. 27. Containerized Cargo Flows along Major Trade Routes, 2000-2004 (in million TEUs)
    28. 28. Integrated Transport Systems <ul><li>Logistics and multimodal transport systems </li></ul><ul><ul><li>Factor of coordination. </li></ul></ul><ul><ul><li>Value added function of integrated transport systems. </li></ul></ul><ul><ul><li>Modal shifts and their complexities. </li></ul></ul>
    29. 29. Integrated Transport Systems: From Fragmentation to Coordination Multiplying effect Consolidation and interconnection Networks Coordination of transportation and production (integrated demand) Globalization Commodity chains Easier contractual agreements; joint ownership Deregulation Alliances and M & A Highs costs and long amortization; Improve utilization to lessen capital costs Returns on investments Capital investments Modal and intermodal innovations; Tracking shipments and managing fleets Containerization & IT Technology Consequence Cause Factor
    30. 30. Value Per Ton of U.S. Freight Shipments by Transportation Mode, 2002
    31. 31. Principles of Modal Shift Maturity Shift Inertia Modal Share (A/B) Time Comparative Advantages Real Modal Share Expected Modal Share Underperformance Over performance
    32. 32. Corridors and Distribution Clusters <ul><li>New logistical spatial structures </li></ul><ul><ul><li>The development of freight corridors and their gateways. </li></ul></ul><ul><ul><li>Physical and locational requirement of modern distribution. </li></ul></ul><ul><ul><li>Freight clusters and “freight villages”. </li></ul></ul><ul><ul><li>Regional distribution strategies. </li></ul></ul>
    33. 33. Freight Distribution Centers along a Corridor Intermodal Corridor Spheres of Distribution (A) Metropolitan (B) Regional / Corridor Transport terminal Distribution / warehousing Agglomeration of distribution Freight Diversion Maritime Interface Emerging Situation Conventional Situation Transport Link 1 2 2 1 Sub-harborization 2 Suburban distribution center Maritime Interface
    34. 34. Characteristics of Large-scale Distribution Centers Less than 48 hours service window. Regional / National Market Sort parcels; Control movements from receiving docks to shipping dock; Management systems controlling transactions. Integration IT Constant movements (pick-up and deliveries) in small batches; Access to corridors and markets. Proximity to highways Accessibility Parking space for trucks; Space for expansion. Large lot Land Sorting efficiency (often cross-docking). One storey; Separate loading and unloading bays Facility More throughput and less warehousing. Larger Size
    35. 35. Freight Corridors & Freight Clusters <ul><li>Geographical consequences </li></ul><ul><ul><li>Migrating to more affordable locations in the periphery. </li></ul></ul><ul><ul><li>Growth in tons-km. </li></ul></ul><ul><ul><li>Competition between passengers (commuters) and freight traffic. </li></ul></ul><ul><li>Freight corridors </li></ul><ul><ul><li>Expands the sphere of distribution. </li></ul></ul><ul><ul><li>Axis along which distribution centers can reliably service many locations along the corridor. </li></ul></ul><ul><li>Emergence of freight clusters </li></ul><ul><ul><li>Functionally unrelated distribution facilities. </li></ul></ul><ul><ul><li>Often located in small intermediary locations. </li></ul></ul>Freight Cluster
    36. 36. Functional Integration of Freight Clusters DC Freight Cluster “ Freight Village”
    37. 37. Port Inland Distribution Network and Freight Clusters
    38. 38. Potential Modal Split Changes Due to the PIDN
    39. 39. Expressrail Lifts, 1991-2005
    40. 40. Conclusion: Towards a “$100 per barrel” Logistics? <ul><li>GPN and Freight Distribution </li></ul><ul><ul><li>Containerization; a global freight distribution market. </li></ul></ul><ul><ul><li>GPN; a global labor, raw materials, parts and retailing market. </li></ul></ul><ul><ul><li>ITS: </li></ul></ul><ul><ul><ul><li>Integration of different geographical scales. </li></ul></ul></ul><ul><ul><ul><li>Reduce congestion for all modes by exploiting their comparative advantages. </li></ul></ul></ul><ul><ul><li>“ $100 per barrel” logistics may be upon us. </li></ul></ul><ul><ul><li>Unique opportunity to build more efficient intermodal relationships between maritime, rail and truck transport systems. </li></ul></ul>“ In the 20th Century, it was said, ‘distance was conquered.’ In the 21st Century, distance shall have her revenge, and the world will become a much bigger place.”