Globalization and Transportation

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Globalization and Transportation

• Production Networks, Logistics, Intermodalism and
  Supply Chain Management

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Globalization

• 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

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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 of
  labor
• MNCs and global city regions are dominant

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Transport and Globalization

• 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

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Globalization and Transport

• 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

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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

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Obstacles to a Seamless World

• 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?

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Transport Demand Responses to Globalization

• 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)

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Trends in Global Restructuring

• 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

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Globalization and Transport Vulnerability

• 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

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Logistics

• 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

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Evolution of Logistics

• 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 firms profitability
  and the global economy
• Why new emphasis? Competitiveness of firms,
  technology, deregulation, packaging

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Aspects of Logistics in the Economy

• 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, FedEx, DHL
• Growth of 3PLs-third party logistics providers

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Transportation and the Supply and Distribution
Chain
Supplier
Customer
Activity
Supply
Distribution
Transport
Transport
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Supply Chain Management (SCM)

• 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

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Push and Pull Supply Chains

• Porters 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

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Global Production Chains and Networks

• Production Chain Materials gt Procurement gt
  Transformation gt Marketing and Sales
  gtDistribution gt 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

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KIA Auto Parts Flow

• Assembled in S Korea KIA Sorrento clear example
  of global supply chain
• Uses 30K parts from all around world
• Parts shipped from places as diverse as Wales and
  Mexicobut 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

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KIA Auto Parts Flow

• 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

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Intermodalism

• 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

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Intermodal Transport Goals

• 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 separate rates and bills
• Attempt to achieve seamlessness where relative
  advantages of each mode are captured

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Elements of Intermodal Transport

• Transferability of a unit load- largely
  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

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First Intermodal Revolution

• 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

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Impacts of Containerization on Ships

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

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Impacts of Containerization on Shipping

• 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

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Impacts of Containerization on Ports

• 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

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Second Intermodal Revolution

• By early 1990s 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