Globalization and Transportation

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

2. 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

3. Globalization and MNCs • Global level corporate opportunities are reinforced by privatization and deregulationof 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

4. 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

5. 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

6. 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

7. 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?

8. 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)

9. 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

10. 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

11. 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

12. 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 firm’s profitability and the global economy • Why new emphasis? Competitiveness of firms, technology, deregulation, packaging

13. 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

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

19. 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

20. Push and Pull Supply Chains • 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

21. Global Production Chains and Networks • 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

22. 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 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

23. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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