Download Global Production Networks

Globalization and
Transportation
Production Networks, Logistics,
Intermodalism and Supply Chain
Management
Globalization
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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
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MNCs and global city regions are dominant
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of labor
Transport and Globalization
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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
Globalization and Transport
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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
Obstacles to a Seamless World
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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?
Transport Demand Responses to
Globalization
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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)
Trends in Global Restructuring
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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
Globalization and Transport Vulnerability
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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
Logistics
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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
Evolution of Logistics
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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
Aspects of Logistics in the Economy
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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
Transportation and the Supply and
Distribution Chain
Supplier
Customer
Supply
Transport
Activity
Distribution
Transport
Traditional Freight Forwarding
Origin
Destination
Shipper
Consignee
Forwarder 1 Airport Airline Airport Forwarder 2
Pickup &
Trucking
Trucking &
Delivery
Forwarder secures
Customs clearance
space from airline. (often by a separate firm)
Forwarders relay information about shipment to/from shipper and consignee.
Air Freight-Linked
Integrated Logistics Services
Shipper
Origin
Airport
Forwarder
Shipper 1
Destination
Airport
Airline
Consignee
Forwarder
Forwarder’s
Warehouse
Consignee
Shipper 2
Forwarder
Shipper 3
Vendor Managed Inventory
Merge-in-Transit
Air Freight-Linked
Integrated Logistics Services
Origin
Airport
Shipper
Forwarder
Shipper
Destination
Airport
Airline
Forwarder’s
Warehouse
Consignee
Forwarder
Consignee 1
Consignee 2
Multiple products/
components
Distribution Hub
Pick & Pack
Testing & Assembly
Postponement
Consignee 3
Supply Chain Management (SCM)
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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
Push and Pull Supply Chains
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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
Global Production Chains and Networks
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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
KIA Auto Parts Flow
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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
KIA Auto Parts Flow
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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
Intermodalism
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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
Intermodal Transport Goals
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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
Elements of Intermodal Transport
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Transferability of a unit loadlargely 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
First Intermodal Revolution
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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
Impacts of Containerization on Ships
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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
Impacts of Containerization on Shipping
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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
Impacts of Containerization on Ports
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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
Second Intermodal Revolution
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By early 1990s first intermodal revolution had
matured
Global assault on regulatory restrictionsliberalization 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