Globalization and Transportation Production Networks Logistics Intermodalism and

Globalization and Transportation Production Networks, Logistics, Intermodalism and Supply Chain Management

Globalization n n Refers to increasing geographical scale of economic, social and political interactions Examples: international trade, mobility of capital, tourism, expanding media delivery Also changing patterns of institutional organization and structural shifts in world economic order Most conspicuous are expanding MNCs, regional trade alliances, and roles of NGOs

n Globalization and MNCs Global level corporate opportunities are reinforced by privatization and deregulation of public controls Combined with technological developments these changes facilitate structural adjustments that alter networks of goods and services production and distribution Allow exploitation of international division n MNCs and global city regions are dominant n n of labor

Transport and Globalization n Too often transport in globalization is ‘invisible’ But transport is central and functions as an enabling mechanism and space adjusting technology (SATs) which integrates production and distribution points SATs such as transport produce flows linking places, not goods in places

Globalization and Transport n n Transport, and especially freight, services have become more critical in order for firms to compete Accommodating new technologies, new markets and new organizational structures requires change- both from providers and consumers whether individuals or firms Need for greater efficiencies has made urgent the need for a more “seamless” transport market “Seamlessness” suggests an environment in which neither national nor modal boundaries neither delay movements nor hinder choice of efficient route/mode combination

n n n Driving Factors in Search for Seamlessness 1/ Competitive pressures require goods and services producing firms to manage almost simultaneously multiple inter-organizational info and material flows 2/ Externalization of production trend is heightened- seeking efficiency in managing flow from source to consumer 3/ Logistics and supply chain management depend upon ways in which separate modal systems are joined: containerization, load centers, hub/feeder networks 4/ Role of real time in global operations has been heightened: JIT, time based competition 5/ Rise of e-commerce has huge consequences for transport system and logistics

Obstacles to a Seamless World n n Enhancement of goods flow has been empowered by liberalization, intermodalism and new technologies in logistics but contradictory forces also exist “Choiceless churning”-inability of concerned social and political forces to confront challenges Extending appropriate entry and exit approaches from national to regional and international levels may be a major issue What policy research is required in this light?

Transport Demand Responses to Globalization n n Longer and more customized transport linkages Sensitivity to timing of connections, arrivals, and departures Speed of movements and transactions Expanded reliance on e-communications and e-commerce Holding together Global Production Networks (GPNs)

Trends in Global Restructuring n n n n Above demand sensitive logistical concerns are consistent with many trends Reliance on out-sourcing Customized production runs Flexibility in resource access Just-in-time management of production and distribution processes Zero inventory Opportunities for economies of scope

Globalization and Transport Vulnerability n n n High levels of auto and oil dependence expose transport to risks of boycott and embargoes Global solutions to environmental problems (air pollution and global warming) expose transport and their dependent economies 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

Logistics n n n Freight transport is both an industry and core input in manufacturing process Must understand how raw, semi-finished and final commodities are moved to serve businesses Changes in technology, markets, institutional structures, and management theory have led to new ways of tying transport into production process

Evolution of Logistics n n Initially a military activity concerned with moving men and munitions to battlefronts Now logistics has integral role in firm operations Ability to move goods quickly, safely and economically are vital to firm’s profitability and the global economy Why new emphasis? Competitiveness of firms, technology, deregulation, packaging

Aspects of Logistics in the Economy n n n Two aspects: logistics management and logistics providers Logistics management in manufacturing and distribution organizations Logistics organizations providing services to manufacturing and distribution firms Growth of integrators—(firms that both fly the cargo between airports and handle ground pick up from and delivery to customers) UPS, Fed. Ex, DHL Growth of 3 PLs-third party logistics providers

Transportation and the Supply and Distribution Chain Supplier Customer Supply Transport Activity Distribution Transport

Supply Chain Management (SCM) n n n Firms now compete not as entities but rather as supply chains Definition: a business strategy to improve shareholder and customer value by optimizing the flow of products, services and related information from source to customer Generally management of multiple relationships across the suppliers, producers and distributors

Push and Pull Supply Chains n n n Porter’s value chain-system shows how firms construct value by gathering profits at various points in the production chain Push chain- costs are transmitted up the chain determined by selling price at preceding level-cost plus approach Pull chain- place downward pressure on suppliers who determine profits from their input costs

Global Production Chains and Networks n n Production Chain: Materials > Procurement > Transformation > Marketing and Sales >Distribution > Service Definition: transactionally linked sequence of functions where each stage adds value to the process of goods and services production Two aspects important: coordination and regulation and geographical configuration Production chains may be very localized but increasingly are global in scale to take advantage of international division of labor

KIA Auto Parts Flow n n n Assembled in S Korea KIA Sorrento clear example of global supply chain Uses 30 K parts from all around world Parts shipped from places as diverse as Wales and Mexico—but very risky War in Iraq and piracy in Malacca Straits Demonstrate surprising adaptability due to advance planning, multiple sourcing of parts and ability to shift routes on short notice

KIA Auto Parts Flow n n n Communicates regularly with suppliers-at least once a week Order several months in advance If necessary use air freight instead of sea freight Greater demand forced KIA to air freight airbags from Swedish company which makes them in the U. S. Greater expense of trans-Pacific flight better than slowing down production line

Intermodalism n n One of most dynamic sectors of transport industry Common meaning: flow of goods involving more than one transport mode Mutimodal transport- involve several different modes Intermodal transport- flow of cargos from shipper to consignee involving single cargo unit across at least two different modes using a single through rate

Intermodal Transport Goals n n n Goal to remove barriers to flows inherent in traditional systems Includes technical limits of transferring freight between competitors and organizational and legal constraints imposed by separates and bills Attempt to achieve seamlessness where relative advantages of each mode are captured

Elements of Intermodal Transport n n n Transferability of a unit loadlargely technological problem Provision of door to door service- requires organizational control that may face regulatory restrictions Transferability has been achieved through containerization- boxes of standard dimensions

First Intermodal Revolution n n n Several attempts to integrate transport modes“Piggyback” or trailer on flatcar (TOFC) Early success limited by rate restrictions, poor reliability and low profitability Containerization was the revolutionary breakthrough Transfer of cargo can be mechanical by crane and safety and security is improved Fast loading and unloading reduces port congestion Growth has occurred through conversion of cargo from traditional break of bulk and the growth of world trade

Impacts of Containerization on Ships n n First generation vessels- WWII liquid bulk tankers Second generation – late 1960 s larger ships (2000 TEUs) capable of stacking 10 lines of containers appeared Third generation- 1980 s size and fuel efficiency- up to 4000 TEUs Fourth generation- 6 -8000 TEU ships

Impacts of Containerization on Shipping n n n n 1. Effects on shipping services and routing Goal to maximize number of voyages and minimize port stays- a. use fleet as efficiently as possible Container services are liner services with regularly schedules arrivals and departures Service frequency is important in designing networks – b. generate cargo and market share Selection of port of call is strongly influenced by cargo availability 2. Effects on structure and organization of industry Development of alliances has been common

Impacts of Containerization on Ports n n n Huge investments in machines to lift and move containers Provision of new berths for large ships Extensive storage space required until land modes can receive cargo Larger demand for adequate port sites and old terminals have been abandoned Elimination of labor has provoked resistance to containerization

Second Intermodal Revolution n n By early 1990 s first intermodal revolution had matured Global assault on regulatory restrictions- liberalization removing control over rates and permitting multimodal ownership Information technology assisting in problems of documentation, security and safety 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 Implies landward links where rail and highway play major roles