Title: Challenging the Derived Transport Demand: Geographical Issues in Freight Distribution
1Challenging 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
2A 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
3A Challenges to Derived Transport Demand
41 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
51 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.
62 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.
7Percentage of Manufacturers Using 3PLP, United
States
83 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
94 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
10National 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)
115 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)
12Time and Cost of Transport Activities Involving
Moving a 40 Foot Container between the American
East Coast and Western Europe
13Cumulative Cost and Time of Moving a 40 Foot
Container between the American East Coast and
Western Europe
14B 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
15B 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
16C 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.