2004 Conference of the Association of American

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  • Service increasingly subject to market forces.
  • Source: Federal Highway Administration, Office of Freight Management. http://ops.fhwa.dot.gov/freight/
  • Source: Robert Lieb (2003) “Third Party Logistics Update: Annual U.S. User and Provider Surveys” http://web.cba.neu.edu/~rlieb/CLM2003presentationv4a.ppt
  • Source: adapted from Robinson, R. (2002) “Ports as Elements in Value-Driven Chain Systems: The New Paradigm”, Maritime Policy and Management , Vol. 29, No. 3, pp. 241-255.
  • Source: Adapted from T. Hsu, FedEx, 1998.
  • Source: Cost of Operations and Time for Shipping a 40’ Container; in APEC’s Congestion Points Study, Phase III, Best Practices Manual and Technical Report, Volume 2 Sea Transport, Feb. 1997, p. 105.
  • Source: Cost of Operations and Time for Shipping a 40’ Container; in APEC’s Congestion Points Study, Phase III, Best Practices Manual and Technical Report, Volume 2 Sea Transport, Feb. 1997, p. 105.
  • 2004 Conference of the Association of American

    1. 1. Challenging the Derived Transport Demand: Geographical Issues in Freight Distribution <ul><li>Jean-Paul Rodrigue, Hofstra University, New York </li></ul><ul><li>Challenges to Derived Transport Demand </li></ul><ul><li>Integrated Transport Demand </li></ul><ul><li>Disciplinary Concerns </li></ul>Email: ecojpr@hofstra.edu Paper available at: http://people.hofstra.edu/faculty/Jean-paul_Rodrigue
    2. 2. A – Challenges to Derived Transport Demand <ul><li>Derived Demand </li></ul><ul><ul><li>Core concept in transport and economic geography. </li></ul></ul><ul><ul><li>Demand for transportation of a product is derived from: </li></ul></ul><ul><ul><ul><li>Supply at the origin. </li></ul></ul></ul><ul><ul><ul><li>Demand at the destination. </li></ul></ul></ul><ul><ul><li>Classic issue of complementarity : </li></ul></ul><ul><ul><ul><li>Between locations. </li></ul></ul></ul><ul><ul><ul><li>Within the transport chain. </li></ul></ul></ul><ul><ul><li>Direct and Indirect demand. </li></ul></ul><ul><ul><li>Induced (or latent) demand is the phenomenon that after supply increases, more of a good is consumed. </li></ul></ul><ul><li>Concept being challenged. </li></ul><ul><li>Paradigm shift ? </li></ul>A B Supply/Origin Demand/Destination A B Transport (Derived) Transport (Integrated)
    3. 3. A – Challenges to Derived Transport Demand Time often a more important component than costs 5) Time component Core element of the supply chain 4) Distribution centers Growing level of functional integration in supply chains 3) Functional integration Demand-driven system 2) Supply / Demand Relationships Global flows; local hubs 1) Operational scale
    4. 4. 1 – Operational Scale Introduction (isolation / proprietary) Integrated demand Operational Scale MP Number of hubs Log Time Expansion and interconnection Standardization and integration A B C D Local Regional Global National/Continental
    5. 5. 1 – Operational Scale <ul><li>Global space of flows </li></ul><ul><ul><li>Multi-scale transport systems: </li></ul></ul><ul><ul><ul><li>A reflection of globalization. </li></ul></ul></ul><ul><ul><li>Large platforms / hubs regulating flows: </li></ul></ul><ul><ul><ul><li>Network effect (convergence). </li></ul></ul></ul><ul><ul><ul><li>Intermediacy. </li></ul></ul></ul><ul><ul><ul><li>Connectivity. </li></ul></ul></ul><ul><ul><li>Corridors . </li></ul></ul><ul><li>Scale effect challenges derived demand </li></ul><ul><ul><li>The higher the scale, the less derived demand applies. </li></ul></ul><ul><ul><li>Intermediate locations . </li></ul></ul><ul><ul><li>Global convergence, local divergence. </li></ul></ul>
    6. 6. 2 – Supply / Demand Relationships <ul><li>Changes in freight distribution </li></ul><ul><ul><li>More intermediate activities . </li></ul></ul><ul><ul><li>More demand-driven . </li></ul></ul><ul><ul><li>Service increasingly subject to market forces. </li></ul></ul><ul><ul><li>Emergence of a logistics industry (3PLP). </li></ul></ul><ul><li>Paradoxical situation </li></ul><ul><ul><li>The more demand-driven, the less derived demand applies. </li></ul></ul><ul><ul><li>Manufacturing and mobility are much more embedded . </li></ul></ul><ul><ul><li>Reinforce the induced demand of transport. </li></ul></ul>
    7. 7. Percentage of Manufacturers Using 3PLP, United States
    8. 8. 3 – Functional Integration of Supply Chains <ul><li>Functional integration </li></ul><ul><ul><li>Many intermediate steps in the transport chain removed . </li></ul></ul><ul><ul><li>Mergers and acquisitions. </li></ul></ul><ul><ul><li>Development of economies of scale in distribution. </li></ul></ul><ul><ul><li>Enabled by technology : </li></ul></ul><ul><ul><ul><li>Modal and intermodal. </li></ul></ul></ul><ul><ul><ul><li>Control. </li></ul></ul></ul><ul><ul><li>Emergence of megacarriers . </li></ul></ul><ul><ul><li>Maritime and land distribution closely integrated. </li></ul></ul><ul><li>Control of the supply chain challenges derived demand </li></ul>Shipping Line Shipping Agent Stevedore Custom Agent Freight Forwarder Rail / Trucking Depot Trucking Megacarrier Economies of scale Land Distribution Maritime Distribution Level of functional integration
    9. 9. 4 – Distribution Centers <ul><li>Distribution centers </li></ul><ul><ul><li>Fundamental link between production and consumption. </li></ul></ul><ul><ul><li>Simple to complex manufacturing / value added activities performed . </li></ul></ul><ul><ul><ul><li>Packaging, labeling, assembly, returns. </li></ul></ul></ul><ul><ul><li>Have their own locations . </li></ul></ul><ul><li>Derived demand being challenged by a new geography of distribution </li></ul>DC Suppliers Customers Industrial Geography Commercial / Retail Geography Geography of Distribution
    10. 10. National Semiconductors, Supply Chain, 1993-2001 Regional Distribution Centers (1993) Global Distribution Center (2001) Wafer Fabrication Assembly & Testing Distribution Center Singapore Portland Salt Lake City Santa Clara Arlington Greenock Swindon Midget Haemek Tokyo Hong Kong Cebu Bangkok Penang Malacca Toa Payoh
    11. 11. 5 – Time Component <ul><li>Time value </li></ul><ul><ul><li>Pressure from manufacturing and retailing. </li></ul></ul><ul><ul><li>As transport costs drop, the value of time increases . </li></ul></ul><ul><ul><li>Time: from an exogenous (derived) to an endogenous component (integrated). </li></ul></ul><ul><li>Challenge </li></ul><ul><ul><li>Timing, sequence , synchronization of freight flows. </li></ul></ul>Transport Costs (TC) Time (T) T1 T2  T  TC Value of time (VT)  VT
    12. 12. Time and Cost of Transport Activities Involving Moving a 40 Foot Container between the American East Coast and Western Europe
    13. 13. Cumulative Cost and Time of Moving a 40 Foot Container between the American East Coast and Western Europe
    14. 14. B – Integrated Transport Demand <ul><li>Integrated transport demand </li></ul><ul><ul><li>Transport activities are concomitantly planned with activities occurring at the origin and destination . </li></ul></ul><ul><ul><li>Control / anticipation: </li></ul></ul><ul><ul><ul><li>Multi scale networks. </li></ul></ul></ul><ul><ul><ul><li>Demand. </li></ul></ul></ul><ul><ul><ul><li>Supply chain. </li></ul></ul></ul><ul><ul><ul><li>Distribution centers. </li></ul></ul></ul><ul><ul><ul><li>Time component. </li></ul></ul></ul><ul><ul><li>Geography of logistics </li></ul></ul>Integrated Demand Multi-scale networks Demand Supply chain DCs Time component
    15. 15. B – Level of Derived Demand Energy / Raw materials Semi-finished products Manufactured goods Extraction Transfer Processing Intra-industrial linkages Manufacturing Retailing Distribution High Average to Low Low
    16. 16. C – Disciplinary Concerns <ul><li>Economic Geography </li></ul><ul><ul><li>Greater importance of distribution as a factor of production and consumption . </li></ul></ul><ul><li>Transport Geography </li></ul><ul><ul><li>Distribution more than a space of flows; also an economic process . </li></ul></ul><ul><li>Supply chain </li></ul><ul><ul><li>Where economic and transport geography meet. </li></ul></ul><ul><ul><li>Space / time relationships in supply chains . </li></ul></ul>

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