transport, logistics and global production
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Chalmers University of Technology, Division of Logistics and Transportation, Gothenburg (Sweden), March 2006
Transport, Logistics and Global Production Networks: A Geographical Perspective
Jean-Paul Rodrigue, Hofstra University, New York
“There’s no business like flow business”
Email: [email protected] available at:http://people.hofstra.edu/faculty/Jean-paul_Rodrigue
Introduction
■ Geography and logistics■ Global Production Networks■ Macro-economics and global freight distribution■ Integrated transport systems■ Corridors and distribution clusters
Introduction
■ So, what about geography and logistics?• The same problem seen from a different perspective:
• Geographers: marginal in a field dominated by engineers and economists.• Engineering: the physical reality of freight distribution:
• Infrastructures (construction, maintenance, upgrade).• Technologies (innovations, technical improvements).• Organization (managing flows; scheduling, timing).
• Geography: the spatial reality of freight distribution:• Locations (accessibility, gateways / hubs, comparative advantages).• Networks (transport links; modes and terminals)• Flows (relationships and complementarity).
Transportation and the Mobility of Passengers and Freight
Inte
nsity
Distance
Passengers
CommutingShoppingRecreation
BusinessTourism
Migration
Waste disposalLocal distribution
TradeEnergy & Raw Materials
Commodity Chains
Freight
Introduction
■ Supply chain trends• Disintermediation:
• Higher level of competition for parts, finished goods and logistical services.
• Migration:• More and more activities
“climbing up the supply chain” to be relocated in low cost locations.
• Geographical process.• Macro-economic impacts:
• Lower employment opportunities & potential high transportation costs.
• “Let them sweat and let us think”?
Manufacturer
Wholesaler
Retailer
Consumer
Physical flow Information flow
Wholesaler
Retailer
Consum
er
DC
Manufacturer
Suppliers
DC
Supply Chain
Fragmentation of the Production System and the Logistics Industry
Inputs Outputs
FactoryRegion A
Region A
Region B
Region C
Conventional
Emerging
Distribution Logistics
APL Logistics Freight Distribution Center, Shenzhen, PRC, December 2005
Box Label at the APL Distribution Center
Kenneth Cole Productions (designer)
Largest apparel store chain in the US
Spring 2006 fashion
Costs of a Shoe Sold $100 in the United States and Made in China
0.4% 8.0% 1.6%
2.0%
5.0%
11.0%
8.5%
13.5%
50.0%
Wages
Materiel
Other production costs
Profit
Transport and taxes
Research
Publicity
Profit
Retail Store
Factory
Shoe Company
Container Waiting to be Loaded, APL DC - Shenzhen
Entry Gate, Port of Yantian, Shenzhen
Container Assembly Yard, Yantian Port
Containership Loading Management System
Loading a Post-Panamax Containership
TJ Maxx Main Distribution Centers
Evansville
Charlotte
Pittston
Worcester
Las Vegas
LA / LB
Oakland
Seattle / Tacoma
Landbridge (double-stack)Chicago
Corwith BNSF Intermodal Rail Yard, Chicago
Su
pp
ly
Dem
an
d
Space
Goods Links/Flows
Global Production Networks: A Synopsis
Global
Production Networks
Right Product
Right QuantityRight Price
Right Location
Right Time
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
Paradigms of Global Production Networks
■ Optimal market potential (upward move)• New markets, improved products or more efficient and timely
retail distribution.• Growth of global retailing and marketing:
• Many products (e.g. technical goods and apparels) have an international reach and recognition.
■ Optimal production costs (downward move)• Lowest production cost possible in view of global differences in
comparative advantages.• Move of labor intensive components of the commodity chain
(more technical complexity recently).• Fragmentation of GPNs through a spatial division of production
(FDI).
Geographical and Functional Integration
Functional Integration Geographical Integration
S
M
D
D
S M
MS
Origin / Destination Relationships
12
3
4
S M D
Supply / Demand Relationships
Information Flows
Physical Flows
Supplying Manufacturing Distribution
S M D
“Principle of Flow” “Principle of Location”
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)
Cu
sto
mers
Macro-Economics and Global Freight Distribution
■ Serious imbalances• Comparative advantages (global labor arbitrage).• Financial schemes (perpetual motion machine).• Separation between production and consumption.• Divergence in the geography of passengers and freight.• Containerized trade.
World’s 10 Largest Exporters and Importers, 2004
0 200 400 600 800 1000 1200 1400 1600
Germany
United States
China
Japan
France
Netherlands
Italy
United Kingdom
Canada
Belgium Imports
Exports
The Global Labor Cost Arbitrage: Hourly Cost of Wages and Benefits, 2004 ($US)
$49.60
$40.96
$36.55
$5.87
$5.48
$1.96
0 20 40 60
Germany
Japan
United States
Brazil
South Africa
China
The “Perpetual Motion” Machine: The Real Dynamics behind the World’s Most Significant Trade Relationship
Goods
Bonds (IOUs)
Asset InflationDebt
Reserves
Interest Rates Unemployment$ for goods
$ for bonds
United States ChinaUSD
USD
Borrowing Investment
Traffic at the 50 Largest Container Ports, 2003
DubaiJeddah
Tacoma
Colombo
Salalah
Oakland
San Juan
Melbourne
Long Beach Charleston
Nhava Sheva
Los Angeles Hampton RoadsNew York/New Jersey
Kobe
Osaka
Tokyo
BusanNagoya
Dalian
Ningbo
Manila
Xiamen
Tianjin
Keelung
Quingdao
ShanghaiShenzhen
Kaohsiung
Hong Kong
Guangzhou
Singapore
Port Kalang
Laem Chabang
Tanjung Perak
Tanjung Priok
Tanjung Pelepas
Less than 2 million TEU
2 to 4 million TEU
4 to 7 million TEU
7 to 10 million TEU
More than 10 million TEU
Genoa
Piraeus
LeHavreAntwerp
Hamburg
Valencia
Barcelona
Algeciras
Rotterdam
Felixstowe
Gioia Tauro
Pacific Asia Europe
Containerized Cargo Flows along Major Trade Routes, 2000-2004 (in million TEUs)
5.6
7.2
8.8
10.2
11.8
3.3
3.9
3.9
4.1
4.3
4.5
5.9
6.1
7.3
8.4
3.6
4.0
4.2
4.9
5.6
2.2
2.7
1.5
1.7
1.8
2.9
3.6
2.6
2.9
3.0
0 5 10 15 20 25 30 35
2000
2001
2002
2003
2004
Asia-USA
USA-Asia
Asia-Europe
Europe-Asia
USA-Europe
Europe-USA
Integrated Transport Systems
■ Logistics and multimodal transport systems• Factor of coordination.• Value added function of integrated transport systems.• Modal shifts and their complexities.
Integrated Transport Systems: From Fragmentation to Coordination
Factor Cause Consequence
Technology Containerization & IT Modal and intermodal innovations; Tracking shipments and managing fleets
Capital investments Returns on investments Highs costs and long amortization; Improve utilization to lessen capital costs
Alliances and M & A Deregulation Easier contractual agreements; joint ownership
Commodity chains Globalization Coordination of transportation and production (integrated demand)
Networks Consolidation and interconnection
Multiplying effect
Value Per Ton of U.S. Freight Shipments by Transportation Mode, 2002
$667
$4,892
$611
$88,618
$37,538
$1,480
$775
$241
$198
1 10 100 1,000 10,000 100,000
All Modes
Multiple modes
Single modes
Air (incl. truck and air)
Parcel, U.S.P.S, or courier
Truck and rail
Truck
Pipeline
Rail
MaturityShiftInertia
Principles of Modal Shift
Modal Share (A
/B)
Time
Comparative Advantages Real Modal Share
Expected Modal Share
Underperformance
Over performance
Corridors and Distribution Clusters
■ New logistical spatial structures• The development of freight corridors and their gateways.• Physical and locational requirement of modern distribution.• Freight clusters and “freight villages”.• Regional distribution strategies.
Freight Distribution Centers along a Corridor
IntermodalCorridor
Spheres of Distribution(A) Metropolitan (B) Regional / Corridor
Transport terminal
Distribution / warehousing
Agglomeration ofdistribution
Fre
igh
t D
ivers
ion
Maritime
Interface
Emerging Situation Conventional Situation
Transport Link
1
2
2
1Sub-harborization
2Suburban distribution center
Maritime
Interface
Characteristics of Large-scale Distribution Centers
Size Larger More throughput and less warehousing.
Facility One storey; Separate loading and unloading bays
Sorting efficiency (often cross-docking).
Land Large lot Parking space for trucks; Space for expansion.
Accessibility Proximity to highways Constant movements (pick-up and deliveries) in small batches; Access to corridors and markets.
Market Regional / National Less than 48 hours service window.
IT Integration Sort parcels; Control movements from receiving docks to shipping dock; Management systems controlling transactions.
Freight Corridors & Freight Clusters
■ Geographical consequences• Migrating to more affordable locations
in the periphery.• Growth in tons-km.• Competition between passengers
(commuters) and freight traffic.■ Freight corridors
• Expands the sphere of distribution.• Axis along which distribution centers
can reliably service many locations along the corridor.
■ Emergence of freight clusters• Functionally unrelated distribution
facilities.• Often located in small intermediary
locations.
Freight Cluster
Functional Integration of Freight Clusters
DCFreight Cluster
“Freight Village”
Port Inland Distribution Network and Freight Clusters
Potential Modal Split Changes Due to the PIDN
0% 20% 40% 60% 80% 100%
2001
2020
Truck
Rail
Barge
Expressrail Lifts, 1991-2005
0
50,000
100,000
150,000
200,000
250,000
300,000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Conclusion: Towards a “$100 per barrel” Logistics?
■ GPN and Freight Distribution• Containerization; a global freight distribution market.• GPN; a global labor, raw materials, parts and retailing market.• ITS:
• Integration of different geographical scales.• Reduce congestion for all modes by exploiting their comparative
advantages.• “$100 per barrel” logistics may be upon us.• Unique opportunity to build more efficient intermodal
relationships between maritime, rail and truck transport systems.
“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.”