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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] Paper available at: http://people.hofstra.edu/faculty/Jean- paul_Rodrigue
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Transport, Logistics And Global Production Networks

Sep 11, 2014

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Page 1: Transport, Logistics And Global Production Networks

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

Page 2: Transport, Logistics And Global Production Networks

Introduction

■ Geography and logistics■ Global Production Networks■ Macro-economics and global freight distribution■ Integrated transport systems■ Corridors and distribution clusters

Page 3: Transport, Logistics And Global Production Networks

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).

Page 4: Transport, Logistics And Global Production Networks

Transportation and the Mobility of Passengers and Freight

Inte

nsity

Distance

Passengers

CommutingShoppingRecreation

BusinessTourism

Migration

Waste disposalLocal distribution

TradeEnergy & Raw Materials

Commodity Chains

Freight

Page 5: Transport, Logistics And Global Production Networks

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

Page 6: Transport, Logistics And Global Production Networks

Fragmentation of the Production System and the Logistics Industry

Inputs Outputs

FactoryRegion A

Region A

Region B

Region C

Conventional

Emerging

Distribution Logistics

Page 7: Transport, Logistics And Global Production Networks

APL Logistics Freight Distribution Center, Shenzhen, PRC, December 2005

Page 8: Transport, Logistics And Global Production Networks

Box Label at the APL Distribution Center

Kenneth Cole Productions (designer)

Largest apparel store chain in the US

Spring 2006 fashion

Page 9: Transport, Logistics And Global Production Networks

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

Page 10: Transport, Logistics And Global Production Networks

Container Waiting to be Loaded, APL DC - Shenzhen

Page 11: Transport, Logistics And Global Production Networks

Entry Gate, Port of Yantian, Shenzhen

Page 12: Transport, Logistics And Global Production Networks

Container Assembly Yard, Yantian Port

Page 13: Transport, Logistics And Global Production Networks

Containership Loading Management System

Page 14: Transport, Logistics And Global Production Networks

Loading a Post-Panamax Containership

Page 15: Transport, Logistics And Global Production Networks

TJ Maxx Main Distribution Centers

Evansville

Charlotte

Pittston

Worcester

Las Vegas

LA / LB

Oakland

Seattle / Tacoma

Landbridge (double-stack)Chicago

Page 16: Transport, Logistics And Global Production Networks

Corwith BNSF Intermodal Rail Yard, Chicago

Page 17: Transport, Logistics And Global Production Networks

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

Page 18: Transport, Logistics And Global Production Networks

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

Page 19: Transport, Logistics And Global Production Networks

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).

Page 20: Transport, Logistics And Global Production Networks

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”

Page 21: Transport, Logistics And Global Production Networks

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

Page 22: Transport, Logistics And Global Production Networks

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.

Page 23: Transport, Logistics And Global Production Networks

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

Page 24: Transport, Logistics And Global Production Networks

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

Page 25: Transport, Logistics And Global Production Networks

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

Page 26: Transport, Logistics And Global Production Networks

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

Page 27: Transport, Logistics And Global Production Networks

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

Page 28: Transport, Logistics And Global Production Networks

Integrated Transport Systems

■ Logistics and multimodal transport systems• Factor of coordination.• Value added function of integrated transport systems.• Modal shifts and their complexities.

Page 29: Transport, Logistics And Global Production Networks

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

Page 30: Transport, Logistics And Global Production Networks

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

Page 31: Transport, Logistics And Global Production Networks

MaturityShiftInertia

Principles of Modal Shift

Modal Share (A

/B)

Time

Comparative Advantages Real Modal Share

Expected Modal Share

Underperformance

Over performance

Page 32: Transport, Logistics And Global Production Networks

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.

Page 33: Transport, Logistics And Global Production Networks

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

Page 34: Transport, Logistics And Global Production Networks

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.

Page 35: Transport, Logistics And Global Production Networks

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

Page 36: Transport, Logistics And Global Production Networks

Functional Integration of Freight Clusters

DCFreight Cluster

“Freight Village”

Page 37: Transport, Logistics And Global Production Networks

Port Inland Distribution Network and Freight Clusters

Page 38: Transport, Logistics And Global Production Networks

Potential Modal Split Changes Due to the PIDN

0% 20% 40% 60% 80% 100%

2001

2020

Truck

Rail

Barge

Page 39: Transport, Logistics And Global Production Networks

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

Page 40: Transport, Logistics And Global Production Networks

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.”