Globalization, Logistics and Intermodalism

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Globalization, Logistics and Intermodalism

  1. 1. Globalization and Transportation Production Networks, Logistics, Intermodalism and Supply Chain Management
  2. 2. Globalization <ul><li>Refers to increasing geographical scale of economic, social and political interactions </li></ul><ul><li>Examples: international trade, mobility of capital, tourism, expanding media delivery </li></ul><ul><li>Also changing patterns of institutional organization and structural shifts in world economic order </li></ul><ul><li>Most conspicuous are expanding MNCs, regional trade alliances, and roles of NGOs </li></ul>
  3. 3. Globalization and MNCs <ul><li>Global level corporate opportunities are reinforced by privatization and deregulation of public controls </li></ul><ul><li>Combined with technological developments these changes facilitate structural adjustments that alter networks of goods and services production and distribution </li></ul><ul><li>Allow exploitation of international division of labor </li></ul><ul><li>MNCs and global city regions are dominant </li></ul>
  4. 4. Transport and Globalization <ul><li>Too often transport in globalization is ‘invisible’ </li></ul><ul><li>But transport is central and functions as an enabling mechanism and space adjusting technology (SATs) which integrates production and distribution points </li></ul><ul><li>SATs such as transport produce flows linking places, not goods in places </li></ul>
  5. 5. Globalization and Transport <ul><li>Transport, and especially freight, services have become more critical in order for firms to compete </li></ul><ul><li>Accommodating new technologies, new markets and new organizational structures requires change- both from providers and consumers whether individuals or firms </li></ul><ul><li>Need for greater efficiencies has made urgent the need for a more “seamless” transport market </li></ul><ul><li>“ Seamlessness” suggests an environment in which neither national nor modal boundaries neither delay movements nor hinder choice of efficient route/mode combination </li></ul>
  6. 6. Driving Factors in Search for Seamlessness <ul><li>1/ Competitive pressures require goods and services producing firms to manage almost simultaneously multiple inter-organizational info and material flows </li></ul><ul><li>2/ Externalization of production trend is heightened- seeking efficiency in managing flow from source to consumer </li></ul><ul><li>3/ Logistics and supply chain management depend upon ways in which separate modal systems are joined: containerization, load centers, hub/feeder networks </li></ul><ul><li>4/ Role of real time in global operations has been heightened: JIT, time based competition </li></ul><ul><li>5/ Rise of e-commerce has huge consequences for transport system and logistics </li></ul>
  7. 7. Obstacles to a Seamless World <ul><li>Enhancement of goods flow has been empowered by liberalization, intermodalism and new technologies in logistics but contradictory forces also exist </li></ul><ul><li>“Choiceless churning”-inability of concerned social and political forces to confront challenges </li></ul><ul><li>Extending appropriate entry and exit approaches from national to regional and international levels may be a major issue </li></ul><ul><li>What policy research is required in this light? </li></ul>
  8. 8. Transport Demand Responses to Globalization <ul><li>Longer and more customized transport linkages </li></ul><ul><li>Sensitivity to timing of connections, arrivals, and departures </li></ul><ul><li>Speed of movements and transactions </li></ul><ul><li>Expanded reliance on e-communications and e-commerce </li></ul><ul><li>Holding together Global Production Networks (GPNs) </li></ul>
  9. 9. Trends in Global Restructuring <ul><li>Above demand sensitive logistical concerns are consistent with many trends </li></ul><ul><li>Reliance on out-sourcing </li></ul><ul><li>Customized production runs </li></ul><ul><li>Flexibility in resource access </li></ul><ul><li>Just-in-time management of production and distribution processes </li></ul><ul><li>Zero inventory </li></ul><ul><li>Opportunities for economies of scope </li></ul>
  10. 10. Globalization and Transport Vulnerability <ul><li>High levels of auto and oil dependence expose transport to risks of boycott and embargoes </li></ul><ul><li>Global solutions to environmental problems (air pollution and global warming) expose transport and their dependent economies </li></ul><ul><li>Transport serves as vehicle for intensifying mass consumption but more info based goods and service ( dematerialization ) mean transport inputs to various goods might be reduced </li></ul>
  11. 11. Logistics <ul><li>Freight transport is both an industry and core input in manufacturing process </li></ul><ul><li>Must understand how raw, semi-finished and final commodities are moved to serve businesses </li></ul><ul><li>Changes in technology, markets, institutional structures, and management theory have led to new ways of tying transport into production process </li></ul>
  12. 12. Evolution of Logistics <ul><li>Initially a military activity concerned with moving men and munitions to battlefronts </li></ul><ul><li>Now logistics has integral role in firm operations </li></ul><ul><li>Ability to move goods quickly, safely and economically are vital to firm’s profitability and the global economy </li></ul><ul><li>Why new emphasis? Competitiveness of firms, technology, deregulation, packaging </li></ul>
  13. 13. Aspects of Logistics in the Economy <ul><li>Two aspects: logistics management and logistics providers </li></ul><ul><li>Logistics management in manufacturing and distribution organizations </li></ul><ul><li>Logistics organizations providing services to manufacturing and distribution firms </li></ul><ul><li>Growth of integrators —(firms that both fly the cargo between airports and handle ground pick up from and delivery to customers) UPS, FedEx, DHL </li></ul><ul><li>Growth of 3PLs-third party logistics providers </li></ul>
  14. 14. Transportation and the Supply and Distribution Chain Activity Supply Distribution Transport Transport Supplier Customer
  15. 19. Supply Chain Management (SCM) <ul><li>Firms now compete not as entities but rather as supply chains </li></ul><ul><li>Definition: a business strategy to improve shareholder and customer value by optimizing the flow of products, services and related information from source to customer </li></ul><ul><li>Generally management of multiple relationships across the suppliers, producers and distributors </li></ul>
  16. 20. Push and Pull Supply Chains <ul><li>Porter’s value chain-system shows how firms construct value by gathering profits at various points in the production chain </li></ul><ul><li>Push chain- costs are transmitted up the chain determined by selling price at preceding level-cost plus approach </li></ul><ul><li>Pull chain- place downward pressure on suppliers who determine profits from their input costs </li></ul>
  17. 21. Global Production Chains and Networks <ul><li>Production Chain: Materials > Procurement > Transformation > Marketing and Sales >Distribution > Service </li></ul><ul><li>Definition : transactionally linked sequence of functions where each stage adds value to the process of goods and services production </li></ul><ul><li>Two aspects important: coordination and regulation and geographical configuration </li></ul><ul><li>Production chains may be very localized but increasingly are global in scale to take advantage of international division of labor </li></ul>
  18. 22. KIA Auto Parts Flow <ul><li>Assembled in S Korea KIA Sorrento clear example of global supply chain </li></ul><ul><li>Uses 30K parts from all around world </li></ul><ul><li>Parts shipped from places as diverse as Wales and Mexico—but very risky </li></ul><ul><li>War in Iraq and piracy in Malacca Straits </li></ul><ul><li>Demonstrate surprising adaptability due to advance planning, multiple sourcing of parts and ability to shift routes on short notice </li></ul>
  19. 23. KIA Auto Parts Flow <ul><li>Communicates regularly with suppliers-at least once a week </li></ul><ul><li>Order several months in advance </li></ul><ul><li>If necessary use air freight instead of sea freight </li></ul><ul><li>Greater demand forced KIA to air freight airbags from Swedish company which makes them in the U.S. </li></ul><ul><li>Greater expense of trans-Pacific flight better than slowing down production line </li></ul>
  20. 25. Intermodalism <ul><li>One of most dynamic sectors of transport industry </li></ul><ul><li>Common meaning: flow of goods involving more than one transport mode </li></ul><ul><li>Mutimodal transport- involve several different modes </li></ul><ul><li>Intermodal transport- flow of cargos from shipper to consignee involving single cargo unit across at least two different modes using a single through rate </li></ul>
  21. 26. Intermodal Transport Goals <ul><li>Goal to remove barriers to flows inherent in traditional systems </li></ul><ul><li>Includes technical limits of transferring freight between competitors and organizational and legal constraints imposed by separate rates and bills </li></ul><ul><li>Attempt to achieve seamlessness where relative advantages of each mode are captured </li></ul>
  22. 27. Elements of Intermodal Transport <ul><li>Transferability of a unit load- largely technological problem </li></ul><ul><li>Provision of door to door service- requires organizational control that may face regulatory restrictions </li></ul><ul><li>Transferability has been achieved through containerization- boxes of standard dimensions </li></ul>
  23. 28. First Intermodal Revolution <ul><li>Several attempts to integrate transport modes- </li></ul><ul><li>“ Piggyback” or trailer on flatcar (TOFC) </li></ul><ul><li>Early success limited by rate restrictions, poor reliability and low profitability </li></ul><ul><li>Containerization was the revolutionary breakthrough </li></ul><ul><li>Transfer of cargo can be mechanical by crane and safety and security is improved </li></ul><ul><li>Fast loading and unloading reduces port congestion </li></ul><ul><li>Growth has occurred through conversion of cargo from traditional break of bulk and the growth of world trade </li></ul>
  24. 29. Impacts of Containerization on Ships <ul><li>First generation vessels- WWII liquid bulk tankers </li></ul><ul><li>Second generation – late 1960s larger ships (2000 TEUs) capable of stacking 10 lines of containers appeared </li></ul><ul><li>Third generation- 1980s size and fuel efficiency- up to 4000 TEUs </li></ul><ul><li>Fourth generation- 6-8000 TEU ships </li></ul>
  25. 30. Impacts of Containerization on Shipping <ul><li>1. Effects on shipping services and routing </li></ul><ul><li>Goal to maximize number of voyages and minimize port stays- a. use fleet as efficiently as possible </li></ul><ul><li>Container services are liner services with regularly schedules arrivals and departures </li></ul><ul><li>Service frequency is important in designing networks – b. generate cargo and market share </li></ul><ul><li>Selection of port of call is strongly influenced by cargo availability </li></ul><ul><li>2. Effects on structure and organization of industry </li></ul><ul><li>Development of alliances has been common </li></ul>
  26. 31. Impacts of Containerization on Ports <ul><li>Huge investments in machines to lift and move containers </li></ul><ul><li>Provision of new berths for large ships </li></ul><ul><li>Extensive storage space required until land modes can receive cargo </li></ul><ul><li>Larger demand for adequate port sites and old terminals have been abandoned </li></ul><ul><li>Elimination of labor has provoked resistance to containerization </li></ul>
  27. 32. Second Intermodal Revolution <ul><li>By early 1990s first intermodal revolution had matured </li></ul><ul><li>Global assault on regulatory restrictions- liberalization removing control over rates and permitting multimodal ownership </li></ul><ul><li>Information technology assisting in problems of documentation, security and safety </li></ul><ul><li>New revolution characterized by “through transport” concept- organization of trade is “door to door” and attempt to integrate various modes into production and consumption systems </li></ul><ul><li>Implies landward links where rail and highway play major roles </li></ul>

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