Globalization and Logistics

8/3/2019 Globalization and Logistics

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Globalization and the Geography of Logistics:

Conceptual Issues

Globalization and the Geography of Logistics:

Conceptual Issues

Jean-Paul Rodrigue

Dept. of Economics & Geography

Hofstra UniversityHempstead, New York, 11549 USA

[email protected]


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OutlineOutline

1. Transportation and Logistics

2. A Transportation Geography of Logistics

3. Dimensions and Case Studies


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Transportation and LogisticsTransportation and Logistics

Time is the essence

Transit times are declining:

Since 1950, the average time in transit for imported goods fell

from 40 days to 10.5 days.

Each transit day adds about 0.8% to the final cost of goods. 20 days at sea adds the equivalent of a 16% tariff.

Modal shift:

Increasing willingness to pay higher costs to gain time.

Air transport: From 7% of trade in 1965 to 30% of trade in 1998.

Conventional explanation: Spoilage, immediate informationcontent and seasonality.

Emerging explanation: Production and trade of intermediate

goods.

The core of the wealth and efficiency based on the flow of

people and commodities.

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Logistical Improvements, Manufacturing Sector,1960-2000Logistical Improvements, Manufacturing Sector,1960-2000

0

2

4

6

8

10

12

14

16

18

20

1960s 1970s 1980s 1990s 2000s

%o

fGDP

0

5

10

15

20

25

30

35

40

Days

Logistics Costs (% GDP)

Inventory Costs (% GDP)

Cycle Time Requirements (days)

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Transportation and LogisticsTransportation and Logistics

% of Products Shipped for Just-in-

Time Manufacturing

0

5

10

15

20

25

30

35

40

45

1990 1992 1995 2000

Logistics has given rise to

two fundamental features of

the contemporary economy:

Just-in-Time (JIT).

Door-to-Door (DTD). Cycle time requirements

down by 25% between 1990

and 2000.

Half of the productivity

boom of the late 1990s was

produced by logistics. Both favour use of the least

energy efficient modes:

Trucking.

Air.

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Logistics Costs, United States, 1980-2000 (in billionsof $)Logistics Costs, United States, 1980-2000 (in billionsof $)

Inventory reduction:

1980: 50%.

1990: 44%.

2000: 37%.

Transportation costs:

1980: 46%.

1990: 52%.

2000: 59%.

While the manufacturersmay achieve economies:

Inventories are in transit. More links are added to the

production chain, with moretraffic movements addedoverall.

A form of externality.0

200

400

600

800

1000

1200

1980 1985 1990 1995 2000

Administrative Costs

Transportation Costs

Inventory Carrying Costs

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Evolution of Logistical Integration, 1960-2000Evolution of Logistical Integration, 1960-2000

Demand Forecasting

Purchasing

Requirements Planning

Production Planning

Manufacturing InventoryWarehousing

Materials Handling

Packaging

Inventory

Distribution Planning

Order Processing

Transportation

Customer Service

Strategic Planning

MaterialsManagement

PhysicalDistribution

LogisticsSupply ChainManagement

Information Technology

Marketing

1980s

1990s

2000s

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ATransport Geography of LogisticsATransport Geography of Logistics

Space

Core concept to geography.

Location and accessibility.

Transportation technologies.

Time Core management concept.

Communication technologies.

Geography of logistics

Information technologies.

Gaining time by using efficientlydistribution systems.

Compromising space and time:

Locations.

Networks.

Interactions / Flows.

22Space Time

Logistics

(Supply chain management)Locations Networks Interactions

Friction


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ATransport Geography of Logistics: LocationATransport Geography of Logistics: Location

Facilities

Warehousing.

Technical requirements.

Labor requirements.

Accessibility To suppliers.

To customers.

Overall supply and

distribution chain.

Transactional environment National / local incentives

(taxes and real estate).

Political climate (security).

International trade.Site

Supply chain Distribution chain

Facilities Accessibility

Transactionalenvironment

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ATransport Geography of Logistics: NetworksATransport Geography of Logistics: Networks

Averag

ePathLength

Network Length

MinimumN

etwork

FullyConn

ectedNetwork

Geographic Barrier

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Logistics

Terminal

Warehousing (accumulation) function

A

Transfer warehousing

Large shipments

Low frequency

Small shipments

High Frequency

ATransport Geography of Logistics: Interactions /Flows

ATransport Geography of Logistics: Interactions /Flows

B

A B

22 Feedback


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Logistical FrictionLogistical Friction

Transportation costs

Distance / time.

Energy / Environmental

impacts.

Complexity of the supply chain Number of parts and tasks.

Number of suppliers and

clients.

Extent of warehousing and of

consolidation.

Transactional environment

Customs procedures and

tariffs.

Corporate management.

Payments and foreign

exchange.

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Locations

Networks Interactions

Logistical

Friction


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Fordism Post-Fordism

Raw materialsand parts

Manufacturing

Sales anddistribution

Fluxes in a Fordist and Post-Fordist ProductionSystemFluxes in a Fordist and Post-Fordist ProductionSystem

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Inputs Outputs

Factory

Task

Region

Fragmentation of the Industrial Production SystemFragmentation of the Industrial Production System

33Region A

Region B

Region C

Logistics


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InboundTruckTraffic by US Port of Entry, 1997InboundTruckTraffic by US Port of Entry, 1997

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The Emergence of the Logistics IndustryThe Emergence of the Logistics Industry

Distribution Dilemmas

Delays and bottlenecks.

Increasing distribution costs.

High investment costs for

expansion.

Logistics Industry Separate service function.

Specialization.

Third-party logistics.

Mergers, acquisitions and

strategic alliances.

Controlling the wholetransportation chain.

Consolidation of deliveries.

Warehousing management.

More value-added activities.

Key players: UPS, FedEx, DHL,

TNT.

Distribution

Manufacturer

A

Distribution

B C

Parts

ProductsCo

nventional

Emerging

Subcontracting

Logistics Industry

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15 Largest Owners of Warehouses, North America,2000 (in millions of square feet)15 Largest Owners of Warehouses, North America,2000 (in millions of square feet)

0 10 20 30 40 50 60 70

United Parcel Service

Exel

General Motors

GATXLogistics

Supervalu

Sysco

AmeriCold Logistics

Fleming Co.

Tibbett & Britten Group

Target Stores

W.W. Grainger Inc.

Kenco Logistics Services

Standard Corp.

NFI

USCO Logistics

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National Semiconductors, Supply Chain, 1996National Semiconductors, Supply Chain, 1996

Wafer Fabrication

Portland

Salt Lake City

Midget Haemek

Santa Clara

ArlingtonGreenock

Assembly & Testing

Cebu

Malacca

Penang

Bangkok

Toa Payoh

Prime Distribution Center

Swindon

Portland

Santa Clara

Tokyo

Hong Kong

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National Semiconductors, Improved Supply Chain,1998National Semiconductors, Improved Supply Chain,1998

Wafer Fabrication

Portland

Salt Lake City

Midget Haemek

Santa Clara

ArlingtonGreenock

Assembly & Testing

Cebu

Malacca

Penang

Bangkok

Toa Payoh

Prime Distribution Center

Singapore

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National Semiconductors, Logistical ImpactsNational Semiconductors, Logistical Impacts

Before

5 regional distribution

centers.

2 weeks delivery cycle.

700 logistics employees. Distribution costs 2.9% of

sales.

42 freight forwarders

contracting with 14 airlines.

After

1 global distribution center

(Singapore).

4 days delivery cycle.

200 logistics employees. Distribution costs 1.2 % of

sales.

1 logistical supplier (FedEx).

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The Logistics of Mitsui & Co.The Logistics of Mitsui & Co.

Distribution System

MitsuiProduction Sales

Needs

Increase production

efficiency.

Reduce distribution

costs.

Services

Offer and develop a

logistical distribution

system.

Needs

Reduce inventory

costs.

Offer better services

to customers.

Logistical center

Supervisions of

orders and the

inventory.

Consolidation of

deliveries.

Producer

Producer

Producer

Customer

Customer

Customer

Orders Orders

Information fluxes

Freight fluxes

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Logistics and InstabilityLogistics and Instability

Just-in-time delivery to just-in-case stockpiling?

Current situation has created challenges for the North

American logistics industry.

Just-in-time system compromised.

Maintaining a buffer stock.

Modal dependency on trucking: 70% of US/CAN trade.

Increased border delays (Canada US).

Potential of geographical switch of supply chain

management:

Readjustment to continental / regional scale.

Security clearance as a comparative factor.

Information systems to mitigate the situation.

Pre-border clearance for regular users.

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Reverse logisticsReverse logistics

Management of reduction

and disposal

Reverse distribution

Collection of damaged or

unsold products. Recycling of used products.

Reusable packaging.

The manufacturer takes

responsibility for delivery as

well as take-back.

Two reverse channels

Recycling / reuse (back to

the suppliers).

Disposal (shipment of non-

recyclable waste).Customers

SupplyChain

Suppliers

R

ecycling/Reuse

Disposal

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Environmental Vicious Circle of LogisticsEnvironmental Vicious Circle of Logistics

Application oflogistics

Activities lessspatially

constrained

More ton-kmtransported

Energy consumptionPollutant Emissions

Congestion

Space consumptionPressure on marginal

land

Emphasis on truckingand air transportation

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Logistics and E-commerceLogistics and E-commerce

Retailer

Supply chain

E-Retailer

Supply chain33

Customers Customers

Warehousing

Globalization and Logistics

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