2-3 International trade and freight distribution

Question 1

international trade

Answer 1

demonstrates the extent of globalization with increased spatial interdependencies between elements of the global economy and their level of integration

Question 2

development of global trade patterns

Answer 2

1. Fordism: Push (manufacture-to-supply; maintain inventories aimed at approximately satisfying the demand)

Post-F: Pull (manufacture-to-order; more flexible and on-demand transport to match supply closely with demand)

2. Fordism: more vertical integration
3. changes in retail logistics:

F: direct replenishment: domestic, and direct sourcing

PF: rationalization, global sourcing, and E-commerce (parcels move to hubs and then a delivery center)

4. changes in global trade flows:

F: links between different functions imply an accumulation of inventory before usage. need warehousing, and a stable and constant demand. Transport function relies on economies of scale with delays at transfer points.

PF: suppy chain reduces the need for warehousing, increase the integration between value chain elements. More deman-derived. adapt to fluctuations in the amount, origins, and destinations of cargo flows. Transport function is integrated to production and distribution, minimizing delays and warehousing.

5. changes in global trade environment:

F: commodity tended to be the most traded bc of regulations and transport costs. international trade mainly took place to cope with scarcity. International transport was serviced by bulk point-to-point services.

PF: by setting a value chain, a corporation is able to generate added value and compete more effectively on global markets. containerization has become imbedded in distribution.

6. PF: more geographically integration as it is easier to move things around.

Question 3

costs of international trade (4 T’s)

Answer 3

1. transaction costs: related to the economic exchange behind the trade. e.g. gathering the information, negotiating, enforcing contracts, letters of credit transactions (monetary exchange)
2. tariff costs and non-tariff barrier such as required standards (ISO), cabotage.
3. transportation costs: containerization, intermodal transportation, economies of scale reduced this
4. time costs: the delays related to the lag between and order and the delivery. Long distance international trade is related to time delays (e.g. custom inspection delays).

supply chain management strategies can mitigate time constraints.

Question 4

modes of international trade

Answer 4

maritime:

• high volume/weight, low value;
• containerization at forefront
• composed of a series of major gateways and hubs

air:

• high value, low volumn/weight
• emphasis on electronics, freight airports are near tech clusters and intermediary locations where refuel or transship

limited share of road and rail, but key within world regions (NAFTA, EU trade): the first mile and last mile problem

Question 5

commodity chain

Answer 5

a functionally integrated network of production, trade and service activities that covers all the stages in a supply chain: from the transformation of raw materials, to intermediate manufacturing, to the delivery of a finished good to a market.

Question 6

the disconnection between global production and distribution

Answer 6

a growing disconnection between the manufacturing base and the “core base” (R&D, distribution and marketing/retail)

Platform corporation: multinational corporation who removed the manufacturing component from their core activities, or never had manufacturing

Question 7

horizontal, vertical integration

Answer 7

1. acquisition of entities that perform a similar function either as a process of consolidation or for the penetration of new markets. e.g. happen in the port sector where the transport chain becomes better integrated.
2. an entity, such as a manufacturer, tries to acquire activities that are upstream or downstream of the steam it is currently involved in. e.g. a port authority.

Question 8

functional, geographical integration

Answer 8

1. link the elements of the supply chain in a cohesive system of suppliers and customers, through flows of freight, capital and info.

Relies on distribution over vase territories (just-in-time, door-to-door).

Principle of flow: synchronize demand with supply ( a flow-based system)

2. increasing reliance on supply sources that are often distant, bc of the improvements in transportation (better geographical complementarity)

comparative advantages are exploited

production and consumption can be more spatially separated without diminishing economies of scale

principle of location: find financially attractive location

Question 9

added value

Answer 9

the purpose of a supply chain is to add value to production and distribution

Question 10

role of distribution center

Answer 10

A distribution center is a facility (ies) that perform consolidation, warehousing, packaging, decomposition, and other functions linked with handling freight

1. provide value-added services to freight
2. perform light manufacturing activities (assembly and labeling)

Tends to focus on the demand of customers

Question 11

conventional vs contemporary goods flow along supply chain

Answer 11

Conventional

1. freight distribution was located at major places of production / in the old industrialized regions.
2. large scale goods flows are directed through major gateways and hubs, and highway intersections

Contemporary

1. locations near main highways are important
2. logistics is particularly sensitive to accessibility
3. network leads to a shift to larger distribution centers (now a core component)
4. Goods flow tends to be of lower volumes, higher frequency, longer distances
5. Goods flow is associated with a modal adaption, e.g. through containerization

Question 12

inland ports

Answer 12

An inland port is a rail or a barge terminal that is linked to a maritime terminal with regular inland transport services

characteristics:

1. an intermodal terminal
2. an array of logistical activities that support and organize the freight transited

Use massification of inland flows to deal with diseconomies (congestion, capacity limitations). It involves inland ports, and a supporting land use structure (logistic zones)

Question 13

logistic zones

Answer 13

Grouping of activities related with freight distribution, such as distribution centers, transportation and supporting services within a defined/ planned area.

Drivers;

1. complexity of freight distribution
2. massification