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Globalization and Transportation. Production Networks, Logistics, Intermodalism and Supply Chain Management. Globalization. Refers to increasing geographical scale of economic, social and political interactions

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Globalization and transportation

Globalization and Transportation

Production Networks, Logistics, Intermodalism and Supply Chain Management


  • 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

Globalization and mncs
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

Transport and globalization
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

Globalization and transport
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

Driving factors in search for seamlessness
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
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?

Transport demand responses to globalization
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)

Trends in global restructuring
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

Globalization and transport vulnerability
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


  • 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
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

Aspects of logistics in the economy
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

Transportation and the supply and distribution chain
Transportation and the Supply and Distribution Chain








Supply chain management scm
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

Push and pull supply chains
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

Global production chains and networks
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

Kia auto parts flow
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

Kia auto parts flow1
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


  • 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
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

Elements of intermodal transport
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

First intermodal revolution
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

Impacts of containerization on ships
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

Impacts of containerization on shipping
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

Impacts of containerization on ports
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

Second intermodal revolution
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