Economic Geography of Transportation

1
Economic Geography of Transportation

• The Danish textile sector
• The Danish textile and clothing industry is
  concentrated around Herning, Ikast and Brande
  around the moors of Jutland
• The start Peasants producing socks and woolen
  goods in parallel with their traditional
  activities
• A regional specialisation developed in the area.
  Specialisation implies increasing amounts of
  transportation

2
Economic Geography of Transportation

• Textiles and clothing General market trends
• International regulations
• Market saturation, excess capacity and price
  consciousness
• New customer attitudes and priorities
• Need for faster adjustment to changes in demand
  and flexibility in general

3
Economic Geography of Transportation

• Changes in the demand for clothing
• Demand for products reflecting lifestile
• Demand for signals reflecting values and
  attitudes
• Increasing demand for design and product
  development
• Development of several sub-cultures with
  different values and lifestyles

4
Economic geography of transportation

• Divergence in the market is created by the
  following factors
• Competencies and knowledge is an increasing part
  of products in the textile sector
• Focus on design concepts and branding
• Increasing target group differentiation
• Development of own retail concepts (shop in the
  shop or franchising)
• Development of e-trade
• Convergence in the market is created by two
  factors
• Supplyers of branded product increasingly
  combines fashion, lifestyle and low prices
• The large retail shops increasingly focus on
  fashion and lifestyle

5
Economic Geography of Transportation

• Parallel development trends
• Concentration, and integration in the processes
  of manufacturing and trade
• Development of an international division of
  labour, based on differences in wage and cost
  levels.
• Increasing international trade in finished
  clothing products
• This in turn leads to increasing need for
  transportation, and for investments, among other
  things in IT

6
Economic Geography of Transportation

• Home country In low-cost country

7
Economic Geography of Transportation

• Freight implications
• Moving manufacturing activities in the clothing
  industry abroad leads to a significan increase
  and complication of the transportation, in
  particular through the use of Outward-Processing-T
  raffic and Cut- Make- and-Trim
• Sourcing from Own Design covers an increasing
  part of the clothing industry, in particular
  among the largest actors. Changing to SOD, where
  raw materials do not pass through Denmark limits
  freight transportation in Denmark and globally.
• Narrowing the focus to smaller end user groups
  for specific product selections and the
  fragmentation of markets further complicates the
  transport of finished products to the end users

8
Economic Geography of Transportation
Denmark
Denmark
Poland/Baltics

• Production
• sewing
• packaging

Processed raw mate- rials Stocks

• Production
• refining
• cutting

Raw materials
Finished goods
Stocks
Stocks
Transportation
Transportation
Transportation
A to B
3. pl
Distribution
(Outward Processing Traffic, OPT)
9
Economic Geography of Transportation

• Raw material supply - simple transportatioon,
  characterised by
• Large quantities
• Long distances
• Low prices, limited additional services
• Use of international specialised transport
  companies

Transportation
A to B
No major needs beyond price and accuracy
10
Economic Geography of Transportation

• Outward Processing Traffic - Integrated
  transportation and logistics require
• Sector knowledge
• Specialising in transportation of ready made
  clothing
• Stocks for maintaining stable production flows
• Flexibility in connection with delivery and
  collection
• Action within short terms

Transportation
3. pl
Specialisation og flexibility
11
Economic Geography of Transportation

• From final goods to the end users - a complex
  distribution, characterised by
• Many destinations
• Smaller consignments
• More frequent consignments
• Track-n-trace
• High quality demand
• Short transit time
• E-trade
• Parcels/mail versus traditional forwarding of
  goods depending on volume and density

Transportation
Distribution
Capacity, reliability, IT og efficiency
12

Economic Geography of Transportation

• Importance of competence based clusters
• Implication in general
• Concentration of competencies related to the
  sector
• Increasing market knowledge
• Existence of a specific infrastructures
• Implications for transportation demand
• Creating dynamics large quantities and a quick
  distribution
• Improved possibilities for common transports
  reduce costs
• Extensive knowledge on specialised transport
  companies
• Pressure on transport companies to keep a good
  sector knowledge

13
Economic Geography of Transportation

• What factors are decisive for the demand for
• transportation and transport centres
• Patterns of raw materials supply
• Organisation and amount of production
• Geographic dispersion of markets and distribution

14
Transportens erhvervsøkonomiske geografi

• Conclusions
• In spite of considerable transportation distances
  and quantities, the pattern of production and the
  international division of labour is only
  marginally affected by transportation costs
• Competencies are apparantly more important than
  transport costs when considering localisation of
  enterprises
• The demand for transportation is a derivative of
  the production pattern, not vice versa. This
  means that transport costs have a decreasing
  importance
• There is an increasing use of flexible
  transportation of parcels by mail. This allows an
  incrasing standardisation and automation.

15
Transportens erhvervsøkonomiske geografi

• Relevance for other industrial sectors
• Wood industry Transportation of raw material has
  still more weight than optimisation of the whole
  process, but transportation costs has a
  remarkably decreasing importance
• Metal and Machinery industry specialisation is
  mainly based on competencies and knowledge, but
  parts of the sector within higly advanced product
  groups have characteristics like the clothing
  industry (electronics)
• Food industry International specialisation is
  limited by the national regulations of the
  agricultural and food markets. Small changes will
  lead to drastic increases in the demand for
  transportation services

16
Transportens erhvervsøkonomiske geografi

• Conclusions
• Globalisation of the production and marketing
  processes offer large benefits from utilisation
  of low cost producers and economies of scale
• These benefits often, more than off-sets the
  increasing transport costs involved in changed
  organisation of the manufacturing
• In addition, raw materials have a decreasing
  importance as part of final products.
• This lead to the general conclusions that
• Transport costs have a decreasing importance for
  location and organisation of manufacturing
• Small changes in the markets may lead to
  considerable and unforeseen changes in the
  pattern of transportation