Transcript Commodity Chains and Freight Transport

GEOG 80 – Transport Geography
Professor: Dr. Jean-Paul Rodrigue
Topic 5 – International and Regional
Transportation
A. The Strategic Space of International
Transportation
B. Transportation, Globalization and International
Trade
C. Freight Transport and Commodity Chains
D. Logistics
B – Transportation, Globalization and International Trade
■ 1. Trade and the Global Economy
■ 2. Global Trade Patterns
■ 3. International Transportation
1. Trade and the Global Economy
■ Interdependencies
• In a global economy, no nation is self-sufficient.
• All involved at different levels in trade:
• Sell what they produce.
• Acquire what they lack.
• Produce more efficiently in some economic sectors.
• Historical growth:
• International trade occurred at an ever increasing scale over the last 500
years.
• Significant technical improvements.
• Possible to trade between parts of the world that previously had limited, if
no access to international transportation systems.
• Division and the fragmentation of production expanded trade.
Major Global Trade Routes, 1400-1800
Baltic
North America
Mexico
Central Asia
Western
Europe
Hormuz
Havana
Caribbean
West Africa
Aden
India
Peru
Trade Route
Dominant Capital Flow
Brazil
Atlantic
Ocean
Canton
Manila
East Africa
Pacific
Ocean
China
Aceh Malacca
Indian
Ocean
Pacific
Ocean
Southeast Asia
1. Trade and the Global Economy
■ International trade
• Trade promotes economic efficiency:
• Lower productions costs.
• Achieve economies of scale.
• Demonstrates the extent of globalization:
• Increased spatial interdependencies between elements of the worldsystem.
• Numerous relationships:
• Huge variety of resources being made accessible.
• Raw materials, energy, goods, food and labor.
• Exchanges of capital, merchandises, raw materials and services.
• Level of integration:
• Growing level of integration.
• The more integrated economies are, the more they trade.
Levels of Economic Integration
Political
Union
Economic
Union
Common government
Common currency, harmonized tax
rates, common monetary and fiscal
policy: EU (partial)
Factors of production move freely
between members
Common
Market
Customs
Union
Common external tariffs
Free
Trade
Free trade between members: NAFTA,
Mercosur, ASEAN (partial)
Complexity
1. Trade and the Global Economy
■ Supporting activities
• Distribution-based:
• Multimodal and intermodal freight transport systems composed of modes,
infrastructures and terminals.
• Regulation-based:
• Customs procedures, regulations and handling of documentation.
• Transaction-based:
• Banking, finance and insurance activities where accounts can be settled.
2. Global Trade Patterns
■ Context
• Growing trend in the global economy.
• Shift in the global trade flows:
• Developing countries having a growing participation.
• 27% of the global trade.
• Increasing share of manufacturing activities taking place in developing
countries.
• More complex and interdependent world-system.
• Trade accounted for 15% of global GDP in 2000.
World Exports of Merchandise, 1950-2004
9
7
Value
Share
6
5
4
3
14
12
10
8
6
2
4
1
2
0
0
50 53 56 59 62 65 968 971 974 977 980 983 986 989 992 995 998 001 004
19 19 19 19 19 19
1
1
1
1
1
1
1
1
1
1
1
2
2
Share of World GDP (%)
Value (Trillions of $US)
8
16
2. Global Trade Patterns
■ Factors
• Production systems are more flexible and embedded:
• Encourages exchanges of commodities and services.
• Transport costs have decreased significantly:
• The transferability of commodities has improved.
• Integration processes promoted trade.
■ Cycles
• Evolution of international trade has a concordance with the
evolution of production.
• Significant fluctuations in international trade:
• Economic cycles of growth and recession.
• Fluctuations in the price of raw materials.
• Disruptive geopolitical events.
2. Global Trade Patterns
■ Nature
• Growing flows of manufactured goods.
• Relatively less bulk liquids (such as oil) and more dry bulk and
general cargo.
■ Geographical distribution
•
•
•
•
Dominance of North America and Western Europe.
Growing share of developing countries of Asia.
China accounting for the most significant growth.
Changes over trans-oceanic trade with Trans-Pacific trade
growing faster than Trans-Atlantic trade.
Global Exports of Merchandises, 1963-2000
100%
80%
Manufactured products
Mineral products
Agricultural products
60%
40%
20%
0%
1963
1975
1990
1994
2000
Merchandise Exports per Continent (in %), 1980-2000
100%
90%
80%
Asia
Middle East
Africa
Eastern Europe
Western Europe
Latin America
North America
70%
60%
50%
40%
30%
20%
10%
0%
1980
1985
1990
1995
2000
World’s 10 Largest Exporters and Importers, 2003
Belgium
Imports
Exports
Canada
Italy
Netherlands
United Kingdom
France
China
Japan
United States
Germany
0
200
400
600
800
1000
1200
1400
Share of World Goods Exports, Selected Countries, 19502001
20.0%
18.0%
16.0%
14.0%
United States
Japan
Germany
P.R. China
Saudi Arabia
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
19
50
19
53
19
56
19
59
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
0.0%
Trade by Ocean, 1995
1995
Pacific
Atlantic
Other
1990
0%
20%
40%
60%
80%
100%
2. Global Trade Patterns
■ Geographical scale
• Regionalization has been one of the dominant paradigm.
• Formation of economic blocs.
• The bulk of international trade has a regional connotation,
promoted by proximity and economic blocs.
Major Economic Blocs, 2000
Other
Economic Bloc
NAFTA
Andean Pact
Mecosur
Caricom
EFTA
EU
Europe's Associates
ASEAN
Trade by Major Economic Bloc
1995
1990
NAFTA-EU
EU-NAFTA
Intra NAFTA
Intra EU
Intra AFTA
0
5
10
15
Percentage
20
25
30
3. International Transportation
■ Context
• Support large quantities of freight flows.
• Considerable technological innovations:
• Transport larger quantities of freight and people more quickly and more
efficiently
• Transportation is often referred as an enabling technology.
• A mean over which international trade could not occur without.
■ Transportation chains
• Large distances involved; several modes.
• Transport chains reinforce the importance of points of transfer.
• Answer the mobility of freight and people.
International Trade and Transportation Chains
International Trade
A
B
Trade barrier
Origin
Assembly
A
Destination
Disassembly
Transport Chain
Rail
Maritime
Transshipment
Road
Customs
B
Share of Containerized Cargo in Global Trade, 1980-2000
800
700
Containerized Cargo
Other General Cargo
Million tons
600
500
400
300
200
100
0
1980
1985
1990
1995
2000
3. International Transportation
■ Transportation infrastructure
• Physical infrastructures such as terminals, vehicles and
networks.
• Either promote or inhibit international trade.
■ Transportation services
• Services involved in the international circulation of freight and
people.
• Warehousing, logistics, finance, insurance and marketing.
■ Transactional environment
• Legal, political, financial and cultural setting.
• Exchange rates, regulations, quotas and tariffs, but also
consumer preferences.
NAFTA Truck Flows, 2003
D – Commodity Chains and Freight Transport
■ 1. Contemporary Production Systems
■ 2. Commodity Chains
■ 3. Commodity Chains and Freight Transport
1. Contemporary Production Systems
■ Production and consumption
• Core components of economic systems.
• Both interrelated through supply / demand relationships.
• Basic economic rationale:
• What is being consumed has to be produced.
• What is being produced has to be consumed.
• They tend to have separate locations.
• Market failure:
• Lack of supply or not enough demand.
• Realization of production and consumption:
• Cannot occur without flows of freight between locations of production and
markets.
1. Contemporary Production Systems
■ Production factors
• Three dominant factors of production are land, labor and capital:
• Previously could not be effectively used at the global level.
• Factors of production have an extended mobility.
• Many firms have relocated segments (sometimes the entire
process) of their industrial production systems to new locations.
• In 2003 American corporations were performing around 27% of
their manufacturing activities abroad.
• 15% for Japanese corporations.
• Strengthened by economic integration and trade agreements.
1. Contemporary Production Systems
■ Distribution
• Overcoming distances used to be related to constraints in
physical distribution as well as to telecommunications.
• Production systems were mainly built through regional
agglomeration economies with industrial complexes.
• Efficiency in distribution has reached a point where it is possible
to manage large scale production and consumption.
■ Industrial linkages
• Relationships used to take place between autonomous entities.
• Uncoordinated linkages.
• Multinational corporations:
• Higher level of linkages within production systems.
• About 30% of all global trade occurs within elements of the same
corporation.
The World’s 20 Largest Corporations by Market Value, 2003 ($US
millions)
Coca Cola
NTT DoCoMo
Bank of America
Novartis
GlaxoSmithKline
Intel
Proctor & Gamble
Vodafone
Merck
Ameri. Int. Group
IBM
BP
Royal Dutch/ Shell
Johnson & Johnson
Citigroup
Pfizer
Wal-Mart Stores
Exxon Mobil
General Electric
Microsoft
0
50,000
100,000
150,000
200,000
250,000
300,000
Hinterland
Global Financial Centers
Telecommunications
Space
Time
London
Los Angeles
Tokyo
New York
Hong Kong
Singapore
Stock Market Opening Period
Fordist and Post-Fordist Corporate Structure
Characteristics
Fordism
Post-Fordism
Organization
Pyramidal
Networked
Focus
Supply
Demand
Style
Structured
Flexible
Reach
Regional / National
Global
Resources
Physical Assets
Information / Knowledge
Production Mode
Mass Production
Mass Customization
Production Structure
Self-Sufficiency
Alliances
Inventories
Months
Hours
Production Cycle Time
Weeks / Months
Days
Information
Weekly
Real-Time
Product Life Cycle
Years
Months
Quality
Affordable Best
Zero-Defect
2. Commodity Chains
■ Definition
• A functionally integrated network of production, trade and service
activities.
• Covers all the stages in a supply chain:
• Transformation of raw materials.
• Intermediate manufacturing stages.
• Delivery of a finished good to a market.
• Conceptualized as a series of nodes, linked by various types of
transactions, such as sales and intrafirm transfers.
• Each successive node within a commodity chain involves the
acquisition or organization of inputs for the purpose of added
value.
Flows
Manufacturing
and assembly
Distribution
Bulk shipping
Unit shipping
LTL shipping
High volumes
Low frequency
Transport Chain
Average volumes
High frequency
Low volumes
High frequency
Market
Stage
Parts and raw
materials
Market
Commodity Chain
2. Commodity Chains
■ Function of commodity chains
• Sequential process used by corporations within a production
system.
• Gather resources.
• Transform them in parts and products.
• Distribute manufactured goods to markets.
• Each sequence is unique:
•
•
•
•
Product types.
Nature of production systems.
Markets requirements.
Stage of the product life cycle.
• Adaptability to changing conditions.
Cereals Supply Chain
Manufacturing
Extraction
Farm
Grain
Processing
Facility
Cereal
Distribution and Retailing
Packaged Cereal
Converter
Paperboard
Packaging
Wood Pulp
Wood Pulp
Mfg
Distributor
Packaged Cereal
Wood Pulp
Label Mfg
Labels
Store
Product Life Cycle
Competition
Sales
Monopoly
Idea
Promotion
Research and
development
Stage 1
First competitors
Mass production
Decline of
production
Growth
Maturity
Decline
Stage 2
Stage 3
Stage 4
Global Production Networks
Country C
Country D
Regional Production
Country B
Regional Specialization
Vertical Integration
Centralized Production
Country A
2. Commodity Chains
■ Types of commodity chains
• Raw materials:
• Attributable to climatic (agricultural products) or geological (ores and fossil
fuels) conditions.
• Developing countries export towards developed countries.
• Semi-finished products:
• Have some transformation that confers them an added value.
• Metals, textiles, construction materials and parts used to make other
goods.
• Regional transport systems integrated to regional production systems.
• Manufactured goods:
• Goods that are shipped towards large consumption markets.
• Flows concerns developed countries, but a significant share is related to
developing countries.
• Containerization has been the dominant transport paradigm.
D – Logistics
■ 1. Logistics
■ 2. Distribution Systems
1. Logistics
■ Definition
•
•
•
•
•
Activities related to the transformation and circulation of goods.
Material supply of production.
Distribution and transport function.
Wholesale and retail.
All operations required for goods (material or nonmaterial) to be
made available on markets or to specific destinations.
■ Logistics operations
• Purchase orders processing:
• Related to the transactional procurement of goods.
• Stock management:
• Related to the physical procurement of goods.
• Transportation:
• Related to the physical distribution of goods.
Logistics Operations
Production
Scheduling
Demand
Purchase
Transportation
1. Logistics
■ Physical Distribution
• Activities involved in the movement of goods:
• From production to sale and consumption.
• Insure that the mobility requirements of supply chains are met:
• Movement and handling of goods.
• Transportation services (trucking, freight rail, air freight, inland waterways,
marine shipping, and pipelines)
• Transshipment and warehousing services:
• (e.g. consignment, storage, inventory management).
1. Logistics
■ Materials Management
• Activities related in the manufacturing of commodities in all their
stages of production along a supply chain.
• Production and marketing activities.
• Insure that the requirements of supply chains are met
• Assembly and raw materials.
• Packaging (for transport and retailing) and recycling discarded
commodities.
Changes in the Relative Importance of Logistical
Functions
Demand Driven
Inventory
Transport System
Information System
Supply Driven
0%
20%
40%
60%
80%
100%
Conventional and Contemporary Arrangement of Goods
Flow
Conventional
Raw
Materials
Manufacturing
Distribution
Local
National
Regional
Retailers
Distribution Storage Distribution
Storage
Customers
Raw Materials & Parts
Contemporary
Raw
Materials
Material flow (delivery)
Information flow (order)
Manufacturing
Core component
Distribution
Center
Retailers
Customers
Supply Chain Management
2. Distribution Systems
■ Context
• Changes in distribution because of logistics.
• Supporting fragmentation of production.
• Emergence of a separate branch of the industry specialized with
the function of distribution.
• E-commerce offers new opportunities.
From Push to Pull Logistics
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Freight flow
Manufacturer
Manufacturer
3PL
Distributor
Distributor
Customer
Push
Returns / Recycling
Pull
Point-of-sale data
Customer
Logistics and E-commerce
Supply chain
Warehousing
E-Retailer
Warehousing
Retailer
Customers
Customers
E-Logistics
Traditional Logistics
Supply chain