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Logistics and Global Commodity Chains. Jean-Paul Rodrigue Associate Professor, Dept. of Economics & Geography, Hofstra University, New York, USA Email: ecojpr@hofstra.edu Paper available at: http://people.hofstra.edu/faculty/Jean-paul_Rodrigue. . Changes in Global Trade.
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Logistics and Global Commodity Chains Jean-Paul RodrigueAssociate Professor, Dept. of Economics & Geography, Hofstra University, New York, USA Email: ecojpr@hofstra.edu Paper available at: http://people.hofstra.edu/faculty/Jean-paul_Rodrigue
Changes in Global Trade Global Production Networks and Commodity Chains The “China Effect” and Global Commodity Chains Integrating Commodity Chains into Containerized Supply Chains Introduction: Capital on the Move Trimodal Container Terminal, Willebroek, Belgium
The Emergence of Supply Chain Management… 1960s 1980s 1990s 2000s Fragmentation Consolidation Functional Integration Value Capture Demand Forecasting Purchasing Materials Management Requirements Planning Production Planning Manufacturing Inventory Warehousing Warehousing Logistics Supply Chain Management Materials Handling Materials Handling Packaging Packaging Inventory Distribution Planning Physical Distribution Information Technology Order Processing Marketing Transportation Strategic Planning Customer Service
… and the Setting of Commodity Chains Commodities Intermediate Goods Final Goods Parts and raw materials Manufacturing and assembly Distribution Stage Market LTL shipping Bulk shipping Unit shipping Market Transport Chain Flows Average volumes High frequency Low volumes High frequency High volumes Low frequency
Major Factors Driving the Integration of Transportation with Distribution
Changes in Global Trade Acute Trade Imbalances Economic Cycles Globalization and Production Container yard, Port of Yantian, China
The Cycle is Strongly Upward for Latin America… Commodities Boom
Globalization; Changing the Profit Structure… High Globalization R&D Sales / Service Marketing Branding Added value Distribution Design Concept Manufacturing Logistics Low Commodity chain
R&D Distribution Marketing / Retail … As Well As Disconnecting Production and Distribution Core Base Manufacturing Base
Containerization and Global Commodity Chains Containerization Intermodal Transportation Ports and Terminal Operators Container waiting to be loaded, Shenzhen, China
Containerization has Integrated Different Transport Systems … Container port Containerization of Maritime Transport Systems Intermodal terminal Pendulum Services Corridor Containerization of Inland Transport Systems Inland Port Offshore hub Intermodal and Transmodal Operations
… which Makes the Container more than a Box Synchronization of inputs and outputs (batches) Flow management (time-based), warehousing unit Distribution Production Container Transport Modes, terminals, intermodal and transmodal operations
Connecting the Dots: Intermodal Transport Chain Composition ‘Last mile’ Interchange Transfer Decomposition ‘First mile’ Local / Regional Distribution National / International Distribution Transport Terminal
Composition: Pallets waiting to be loaded in a container (APL DC - Shenzhen, China)
Interchange: UPS Willow Springs Distribution Center, Chicago
Decomposition: Unloading Containers and Palletizing Shipments (Antwerp)
The World’s Largest Maritime Trade Gateways… Traffic at the 50 Largest Container Ports, 2005
… Mainly Controlled by Large Holding Conglomerates … Major Port Holdings, 2007
Port Terminal Operations Inland Modes and Terminals Distribution Centers Commodity Chain … That are Following a “Value Capture” Strategy Maritime Services Port Holding Port Authority Port Services Inland Services Vertical Integration Horizontal Integration / Vertical Maritime Shipping
Where the Going Gets Tough: The “Last Mile” in Freight Distribution Massification Atomization Frequency Capacity REGIONAL LOCAL HINTERLAND GLOBAL Shipping Network Corridor Segment Customer “Last Mile” Inland Terminal Distribution Center Gateway
The “China Effect” and Global Commodity Chains Debt and the Currency Leverage Game Production and Distribution Dislocations Shift in the world’s commercial balance Empty trucks waiting to enter China, Hong Kong
… as Well as the Largest Buyer Financing Scheme in History… USD $ for goods Interest Rates Unemployment Goods Borrowing Investment Bonds (IOUs) Asset Inflation Debt Reserves $ for bonds United States China USD
… Where Exchange Rates were Used as Leverage Discount Window Export Oriented Debasement Closing of the Discount Window
Integrating Commodity Chains into Containerized Supply Chains Maritime Shipping Networks Containerized Commodities Cold Chain Logistics “Emma Maersk”, 12,500 TEU, Rotterdam, Netherlands
The Three Major Corridors of Maritime Circulation … Three Major Pendulum Routes Serviced by OOCL, 2006
… Which Implies the Emergence of Global Trade Highways Pacific Connector North American Landbridge Eurasian Landbridge Arctic Routes Atlantic Connector Circum-Equatorial Maritime Highway
The Potential of Containerization of Commodities … • For bulk transport • Economies of scale confer a net benefit. • Specialization: • Low utilization levels and time delays for the assembly of loads. • At most 50% due to empty backhauls, but much lower in reality. • Containerization: • Flow concept; lower transshipment costs. • Its own warehouse unit. • Faster distribution (extending the realm of perishables). • Levels the playing field, particularly in view of established commodity shippers. • Respective benefits for bulk and container carriers. • Handle variety requirements. • Rise in commodity prices makes them increasingly suitable for containerization.
… Will Likely See the Emergence of a Complementarity Bulk Commodity Chain Customer Supplier Port Point-to-Point Consolidationcenter Complementarity Container port Pendulum Services Intermodal terminal Containerized Commodity Chain
… Leading to the Setting of New Containerized Commodity Chains
What Could be the Impacts on Commodity Markets? • Containerization and commodity markets • Futures / forward contracts are often conditioned by the capacity for delivery. • What would be the impacts of containerization on this market structure? • A contract could involve the allocation of containers. • What type of “price discovery” this would entail. • From futures to spot markets? • Transportation flexibility will increase financial flexibility.
Cold Chain Logistics is Getting Increasingly Reliable Potential integrity breach Temperature Range Temperature Potential integrity breach Time Transport Unloading – Warehousing – Loading Transport
… Adapting to a Challenging Environment with many Opportunities • Global trade • Imbalances and dislocations. • Global commodity chains • Added value and value capture. • The “China Effect” • Trade and financial process. • Containerized commodity chains • Opportunities to rectify imbalances. • Setting of new commodity chains. • Global prospects • Positive for commodities. • New markets and investment opportunities.
