Challenging the Derived Transport Demand: Geographical Issues in Freight Distribution


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Challenging the Derived Transport Demand
Geographical Issues in Freight Distribution

• Jean-Paul Rodrigue Hofstra University New York
• Challenges to Derived Transport Demand
• Integrated Transport Demand
• Disciplinary Concerns

Email ecojpr_at_hofstra.edu Paper available
at http//people.hofstra.edu/faculty/Jean-paul_Ro
drigue
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A Challenges to Derived Transport Demand

• Derived Demand
• Core concept in transport and economic geography.
• Demand for transportation of a product is derived
  from
• Supply at the origin.
• Demand at the destination.
• Classic issue of complementarity
• Between locations.
• Within the transport chain.
• Direct and Indirect demand.
• Induced (or latent) demand is the phenomenon that
  after supply increases more of a good is
  consumed.
• Concept being challenged.
• Paradigm shift

Supply/Origin
A
A
Transport (Derived)
Transport (Integrated)
B
B
Demand/Destination
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A Challenges to Derived Transport Demand
4
1 Operational Scale
Introduction (isolation / proprietary)
Expansion and interconnection
Standardization and integration
Integrated demand
A
B
C
D
MP
Global
Log
National/Continental
Regional
Local
Operational Scale
Number of hubs
Time
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1 Operational Scale

• Global space of flows
• Multi-scale transport systems
• A reflection of globalization.
• Large platforms / hubs regulating flows
• Network effect (convergence).
• Intermediacy.
• Connectivity.
• Corridors.
• Scale effect challenges derived demand
• The higher the scale the less derived demand
  applies.
• Intermediate locations.
• Global convergence local divergence.

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2 Supply / Demand Relationships

• Changes in freight distribution
• More intermediate activities.
• More demand-driven.
• Service increasingly subject to market forces.
• Emergence of a logistics industry (3PLP).
• Paradoxical situation
• The more demand-driven the less derived demand
  applies.
• Manufacturing and mobility are much more
  embedded.
• Reinforce the induced demand of transport.

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Percentage of Manufacturers Using 3PLP United
States
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3 Functional Integration of Supply Chains

• Functional integration
• Many intermediate steps in the transport chain
  removed.
• Mergers and acquisitions.
• Development of economies of scale in
  distribution.
• Enabled by technology
• Modal and intermodal.
• Control.
• Emergence of megacarriers.
• Maritime and land distribution closely
  integrated.
• Control of the supply chain challenges derived
  demand

Maritime Distribution
Land Distribution
Custom Agent
Shipping Agent
Trucking
Rail / Trucking
Stevedore
Freight Forwarder
Shipping Line
Depot
Economies of scale
Megacarrier
Level of functional integration
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4 Distribution Centers
Industrial Geography

• Distribution centers
• Fundamental link between production and
  consumption.
• Simple to complex manufacturing / value added
  activities performed.
• Packaging labeling assembly returns.
• Have their own locations.
• Derived demand being challenged by a new
  geography of distribution

Suppliers
DC
Geography of Distribution
Customers
Commercial / Retail Geography
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National Semiconductors Supply Chain 1993-2001
Regional Distribution Centers (1993)
Swindon
Portland
Tokyo
Santa Clara
Midget Haemek
Hong Kong
Bangkok
Cebu
Penang
Wafer Fabrication
Assembly Testing
Distribution Center
Toa Payoh
Malacca
Greenock
Salt Lake City
Arlington
Singapore
Global Distribution Center (2001)
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5 Time Component

• Time value
• Pressure from manufacturing and retailing.
• As transport costs drop the value of time
  increases.
• Time from an exogenous (derived) to an
  endogenous component (integrated).
• Challenge
• Timing sequence synchronization of freight
  flows.

TC
VT
Value of time (VT)
Transport Costs (TC)
T
T1
T2
Time (T)
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Time and Cost of Transport Activities Involving
Moving a 40 Foot Container between the American
East Coast and Western Europe
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Cumulative Cost and Time of Moving a 40 Foot
Container between the American East Coast and
Western Europe
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B Integrated Transport Demand
Integrated Demand

• Integrated transport demand
• Transport activities are concomitantly planned
  with activities occurring at the origin and
  destination.
• Control / anticipation
• Multi scale networks.
• Demand.
• Supply chain.
• Distribution centers.
• Time component.
• Geography of logistics

Multi-scale networks
Demand
Supply chain
DCs
Time component
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B Level of Derived Demand
Energy / Raw materials
Semi-finished products
Manufactured goods
Extraction
Intra-industrial linkages
Distribution
Transfer
Manufacturing
Processing
Retailing
Average to Low
Low
High
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C Disciplinary Concerns

• Economic Geography
• Greater importance of distribution as a factor of
  production and consumption.
• Transport Geography
• Distribution more than a space of flows also an
  economic process.
• Supply chain
• Where economic and transport geography meet.
• Space / time relationships in supply chains.