Docstoc

Logistics and Global Commodity Chains

Document Sample
Logistics and Global Commodity Chains Powered By Docstoc
					Fall Summit, HSH Nordbank, Hamburg, Germany,
November 15, 2007




          Logistics and Global
          Commodity Chains
           Jean-Paul Rodrigue
           Associate Professor, Dept. of Economics &
           Geography, Hofstra University, New York, USA

           Email: ecojpr@hofstra.edu
           Paper available at:
           http://people.hofstra.edu/faculty/Jean-paul_Rodrigue
           Introduction: Capital on the Move



               Changes in Global Trade
                Global Production Networks and
               Commodity Chains
                The “China Effect” and Global
               Commodity Chains
                Integrating Commodity Chains into
               Containerized Supply Chains
2   Trimodal Container Terminal, Willebroek, Belgium
            The Emergence of Supply Chain
            Management…
           1960s                   1980s                  1990s                 2000s
      Fragmentation           Consolidation        Functional Integration Value Capture
     Demand Forecasting
          Purchasing
                                Materials
    Requirements Planning
                               Management
     Production Planning
    Manufacturing Inventory
         Warehousing            Warehousing
                                                                              Supply Chain
      Materials Handling      Materials Handling         Logistics
                                                                              Management
          Packaging              Packaging
           Inventory
     Distribution Planning
       Order Processing
                                 Physical            Information Technology
                                Distribution
        Transportation                                     Marketing

3      Customer Service                                Strategic Planning
            … and the Setting of Commodity Chains



            Commodities      Intermediate Goods            Final Goods
    Stage




                                                                            Market
            Parts and raw       Manufacturing
                                                            Distribution
              materials         and assembly


            Bulk shipping       Unit shipping              LTL shipping
    Flows




                                                                            Market
                                         Transport Chain

             High volumes      Average volumes              Low volumes
             Low frequency      High frequency             High frequency




4
          Major Factors Driving the Integration of
          Transportation with Distribution

    Factor          Cause                    Consequence
    Technology      Containerization & IT    Modal and intermodal
                                             innovations; Tracking shipments
                                             and managing fleets
    Capital         Returns on investments   Highs costs and long
    investments                              amortization; Improve utilization
                                             to lessen capital costs
    Alliances and   Deregulation             Easier contractual agreements;
    M&A                                      joint ownership

    Commodity       Globalization            Coordination of transportation
    chains                                   and production (integrated
                                             demand)
    Networks        Consolidation and        Multiplying effect
5                   interconnection
            Changes in Global Trade



                                             
                       Acute Trade Imbalances
                          Economic Cycles
                     Globalization and Production




6   Container yard, Port of Yantian, China
          A Changing Trade Environment…

    Stage                Nature                   Function

    Until the 1970s      Immobile factors of      Cope with scarcity
                         production


    Late 20th century    Mobility of factors of   Promote economic
                         production               efficiency


    Early 21st century   Global production        Added value within
                         networks                 commodity chains


7
                … and the Cycles of International Trade


                     Changes in the Value World’s Merchandise Trade, Production and GDP,
                                               1950-2005 (in %)
    30

                          Total Merchandise Trade
    25
                          World GDP

    20                    World Merchandise Production


    15

    10

     5

     0
      50

           52

                54

                     56

                           58

                                60

                                      62

                                           64

                                                66

                                                     68

                                                          70

                                                               72

                                                                    74

                                                                         76

                                                                              78

                                                                                   80

                                                                                        82

                                                                                             84

                                                                                                  86

                                                                                                       88

                                                                                                            90

                                                                                                                 92

                                                                                                                      94

                                                                                                                           96

                                                                                                                                98

                                                                                                                                     00

                                                                                                                                          02

                                                                                                                                               04
     19

           19

                19

                     19

                          19

                                19

                                     19

                                           19

                                                19

                                                     19

                                                          19

                                                               19

                                                                    19

                                                                         19

                                                                              19

                                                                                   19

                                                                                        19

                                                                                             19

                                                                                                  19

                                                                                                       19

                                                                                                            19

                                                                                                                 19

                                                                                                                      19

                                                                                                                           19

                                                                                                                                19

                                                                                                                                     20

                                                                                                                                          20

                                                                                                                                               20
     -5

    -10
8
           The Cycle is Strongly Upward for Latin
           America…

                        Latin American Trade (1995-2005) Billions USD
    400

    350
                                                              Commodities Boom

    300

    250

    200

    150

    100
                                                                                  Exports
     50                                                                           Imports


      0
9         1995   1996    1997   1998   1999   2000    2001   2002   2003   2004     2005
             … as Well as for Eastern Europe


                         Share of World Trade, Eastern Europe (1995-2005)

     4.0


     3.5


     3.0


     2.5


     2.0

                                                                                    Exports
     1.5
                                                                                    Imports

     1.0
10         1995   1996     1997   1998    1999   2000   2001   2002   2003   2004     2005
           International Trade Involves Acute
           Imbalances…

                           World’s 10 Largest Exporters and Importers, 2005
            Belgium
                                                                                       Imports
            Canada                                                                     Exports
               Italy
     United Kingdom
        Netherlands
             France
              Japan
              China
       United States
           Germany

                       0       200    400     600    800     1,000    1,200   1,400   1,600   1,800
11                                                  Billions of $US
           … that Resulted in Imbalanced Containerized
           Freight Flows …


             Balance of Containerized Cargo Flows along Major Trade
                                Routes, 1995-2006
      0
           1995      1996   1997   1998   2000   2001   2002   2003   2004   2005   2006
      -2
      -4
      -6
      -8
     -10
     -12
     -14          Europe/USA
                  Asia/Europe
     -16
                  Asia/USA
12   -18
              … with Imbalanced Freight Rates as Well


                                               Maritime Freight Rates (USD per TEU), 1993-2006
$2,500




$2,000




$1,500




$1,000




 $500                      Asia - US
                           US- Asia
                           Asia - Europe
                           Europe - Asia
   $0
         1993-4

                  1994-2

                             1994-4

                                      1995-2

                                                1995-4

                                                         1996-2

                                                                  1996-4

                                                                           1997-2

                                                                                    1997-4

                                                                                             1998-2

                                                                                                      1998-4

                                                                                                               1999-2

                                                                                                                        1999-4

                                                                                                                                 2000-2

                                                                                                                                          2000-4

                                                                                                                                                   2001-2

                                                                                                                                                            2001-4

                                                                                                                                                                     2002-2

                                                                                                                                                                              2002-4

                                                                                                                                                                                       2003-2

                                                                                                                                                                                                2003-4

                                                                                                                                                                                                         2004-2

                                                                                                                                                                                                                  2004-4

                                                                                                                                                                                                                           2005-2

                                                                                                                                                                                                                                    2005-4
               Globalization; Changing the Profit Structure…



     High
                   R&D                 Globalization            Sales / Service
     Added value




                         Branding                              Marketing


                              Design                     Distribution
                   Concept               Manufacturing          Logistics

     Low

                                       Commodity chain

14
     … As Well As Disconnecting Production and
     Distribution




           R&D       Core Base
                     Distribution     Marketing / Retail


                 Manufacturing Base




15
            Containerization and Global Commodity
            Chains



                                         
                            Containerization
                       Intermodal Transportation
                      Ports and Terminal Operators




16
     Container waiting to be loaded, Shenzhen, China
     Containerization has Integrated Different
     Transport Systems …
                          Container
                            port




          Containerization of Maritime Transport Systems


                                      Pendulum          Intermodal
      Corridor                         Services           terminal


           Containerization of Inland Transport Systems
                 Inland
                  Port
                                      Offshore
                                        hub

17               Intermodal and Transmodal Operations
       … which Makes the Container more than a
       Box

     Synchronization of inputs and             Flow management (time-based),
          outputs (batches)                          warehousing unit

         Production                                 Distribution



                                 Container



                                 Transport

                          Modes, terminals, intermodal and
18                            transmodal operations
     Connecting the Dots: Intermodal Transport
     Chain


     Composition                                               ‘Last mile’
                                Interchange


                     Transfer




      ‘First mile’                                          Decomposition

                           Local / Regional Distribution
                           National / International Distribution
                           Transport Terminal
19
Composition: Pallets waiting to be loaded in a
container (APL DC - Shenzhen, China)
Interchange: Post-Panamax Containership (Le
Havre)
     Interchange: UPS Willow Springs Distribution
     Center, Chicago




22
     Decomposition: Unloading Containers and
     Palletizing Shipments (Antwerp)




23
                                 The World’s Largest Maritime Trade
                                 Gateways…

                              Seattle Tacoma
                                                                     New York/New Jersey
                                       Oakland
                          Long Beach                              Hampton Roads
                                                    Charleston Savannah
                                          Los Angeles                                                                                        Dubai
                                                                                                                                  Jeddah
                                                                                                                                           Salalah        Nhava Sheva


                                                                                                                                                             Colombo

            TEU
                         Less than 2 million
                         2 to 4 million
                                                                                    Santos
                         4 to 7 million

                         7 to 10 million                                                                                                                                                           Melbourne


                         More than 10 million
                                                                                                Traffic at the 50 Largest Container Ports,
                                                                                                2005Pacific Asia                           Europe                                Hamburg
                                                                                                         Tianjin                                                              Bremen/Bremerhafen
                                       Laem Chabang                                                                                                           Rotterdam
                                                                                                                                                     Felixstowe         Antwerp
                                                                                                Quingdao Dalian
                   Port Kalang                                                                                                                                   LeHavre
                                                           Hong Kong Shenzhen                 Shanghai
     Tanjung PelepasSingapore          Ho Chi Minh                 Guangzhou
                                                                                           Ningbo             Busan
                                                                         Xiamen
                                                                       Kaohsiung Keelung
                                                                                                                Kobe
         Tanjung Priok                                                                                    Nagoya
                                                                                                                       Tokyo                                      Barcel ona
                                                                                                                       Yokohama
                                                            Manila                                                                                          Valencia
                                                                                                                                                                                           Gioia Tauro
                                                                                                                                              Algeciras
24
                  … Mainly Controlled by Large Holding
                  Conglomerates …
                                                             Dedicated Maritime Container Terminals




     APM Terminals
     Dubai Ports World
     Hutchison Port Holdings
     Port of Singapore Authority
     Eurogate
     Stevedoring Services of America           Major Port Holdings, 2007
                                       Pacific Asia                                      Europe




25
              … That are Following a “Value Capture”
              Strategy
     Port Authority


                       Maritime Services



                         Port Services

                        Inland Services
                                                          Port Holding

                      Vertical Integration        Horizontal Integration / Vertical


     Maritime                     Port Terminal    Inland Modes       Distribution
     Shipping                      Operations      and Terminals        Centers


26                                        Commodity Chain
       Where the Going Gets Tough: The “Last Mile”
       in Freight Distribution


          Massification                              Atomization

                                                                        Frequency

                                                                        Capacity
             GLOBAL               HINTERLAND REGIONAL LOCAL

     Shipping Network              Corridor         Segment
                                                                        Customer
                                                                        “Last Mile”
                                               Inland    Distribution
                        Gateway               Terminal     Center




27
            The “China Effect” and Global Commodity
            Chains



                                        
          Debt and the Currency Leverage Game
         Production and Distribution Dislocations
          Shift in the world’s commercial balance




28
     Empty trucks waiting to enter China, Hong Kong
           The “China Effect” is Mainly About Low
           Manufacturing Wages…

                    Major Components to Price Reductions by the Chinese
                               Manufacturing Sector, 2005

             Lax Environmental Regulations           2.3%

             Lax Health & Safety Regulations         2.4%

                  Foreign Direct Investments         3.1%

                     Counterfeiting & Piracy                8.6%

                      Undervalued Currency                        11.4%
                Industrial Network Clustering                         16.0%

     Export Industry Subsidies & Preferences                          16.7%

                                      Wages                                            39.4%

                                                0%          10%           20%   30%   40%      50%
29
      … as Well as the Largest Buyer Financing
      Scheme in History…

                             USD


                          $ for goods
                                         Interest Rates
           Unemployment


        Investment        Goods                Borrowing

                          Bonds (IOUs)


     Reserves                                      Asset Inflation
                          $ for bonds                  Debt


         China               USD         United States


30
                … Where Exchange Rates were Used as
                Leverage

                                      Yuan Exchange Rate ( per USD) , 1981-2007
     9

     8             Yuan per USD
                   Real per USD
     7

     6
                                                                                                                          Discount Window
            Export Oriented
     5       Debasement                                                                                                                Closing of the
     4
                                                                                                                                       Discount Window
     3

     2

     1

     0
         1981
                1982
                       1983
                              1984
                                     1985
                                            1986
                                                   1987
                                                          1988
                                                                 1989
                                                                        1990
                                                                               1991
                                                                                      1992
                                                                                             1993
                                                                                                    1994
                                                                                                           1995
                                                                                                                  1996
                                                                                                                         1997
                                                                                                                                1998
                                                                                                                                       1999
                                                                                                                                              2000
                                                                                                                                                     2001
                                                                                                                                                            2002
                                                                                                                                                                   2003
                                                                                                                                                                          2004
                                                                                                                                                                                 2005
                                                                                                                                                                                        2006
                                                                                                                                                                                               2007
31
            Integrating Commodity Chains into
            Containerized Supply Chains



                                       
                      Maritime Shipping Networks
                      Containerized Commodities
                         Cold Chain Logistics




32
     “Emma Maersk”, 12,500 TEU, Rotterdam, Netherlands
            The Three Major Corridors of Maritime
            Circulation …
     Three Major Pendulum Routes Serviced by OOCL, 2006



                                                                                      Hamburg
                                                  Atlantic Express (ATX)        Le Havre     Rotterdam
                                                                           Southampton                                                                    South China Express (SCX)
                                                                                        Fos Genoa
                                  New York                                      Barcelona
            Oakland                                           27 Days                                    European Union / Mediterranean (EUM)                          Tokyo
                                   Norfolk
              Los Angeles    Charleston                                                                                                                   Ningbo Shanghai

                                                                                                                                                       Kaohsiung
                                                                                                                                                   Hong Kong                   39 Days
                                                                                                                                         Laem Chabang


                                                                                                                                              Singapore
                                                                                                                               49 Days     Port Kelang




     Note: Paths are approximate
                                                       Three Major Pendulum Routes Serviced by OOCL, 2006
      Atlantic Express (ATX)                                       European Union / Mediterranean (EUM)                        South China Express (SCX)
      Origin             Destination         Transit Time (days)   Origin             Destination        Transit Time (days)   Origin            Destination        Transit Time (days)
      Southampton        New York                     8            Port Kelang        Genoa                       14           Tokyo             Kaohsiung                    4
      New York           Norfolk                      2            Genoa              Barcelona                    2           Kaohsiung         Shekou                       1
      Norfolk            Charleston                   2            Barcelona          Fos                          2           Shekou            Laem Chabang                 4
      Charleston         Rotterdam                    10           Fos                Singapore                   15           Laem Chabang      Singapore                    3
      Rotterdam          Hamburg                      2            Singapore          Hong Kong                    4           Singapore         Kaohsiung                    3
      Hamburg            Le Havre                     2            Hong Kong          Shanghai                     2           Kaohsiung         Los Angeles                 11
      Le Havre           Southampton                  1            Shanghai           Ningbo                       2           Los Angeles       Oakland                      4
                                                                   Ningbo             Shekou                       2           Oakland           Tokyo                        9
                                                                   Shekou             Hong Kong                    1
33                                                                 Hong Kong
                                                                   Singapore
                                                                                      Singapore
                                                                                      Port Kelang
                                                                                                                   4
                                                                                                                   1
     Note: Transit time includes port time                                                                                                                         Source: OOCL Web Site
     … Which Implies the Emergence of Global
     Trade Highways



               o r
            at
             u
          Eq




                     North American Landbridge

                                                                 Eurasian Landbridge
                                                 Arctic Routes




                                   Circum-Equatorial Maritime Highway



34
          The Potential of Containerization of
          Commodities …

     ■ For bulk transport
        • Economies of scale confer a net benefit.
        • Specialization:
            • Low utilization levels and time delays for the assembly of loads.
            • At most 50% due to empty backhauls, but much lower in reality.
        • Containerization:
            • Flow concept; lower transshipment costs.
            • Its own warehouse unit.
            • Faster distribution (extending the realm of perishables).
            • Levels the playing field, particularly in view of established commodity
              shippers.
            • Respective benefits for bulk and container carriers.
            • Handle variety requirements.
        • Rise in commodity prices makes them increasingly suitable
35
          for containerization.
             … Where Each System has its own
             Advantages …

                        Bulk (Grain, Oil)   Containerized

     Driving force      Cost / Volume       Time / Flexibility

     Mode of shipment   Large output        Small shipments

     Flows              Specialized         Mixed

     Terminals          Dedicated           General Container

     Markets            Mass                Niche
36
     … Will Likely See the Emergence of a
     Complementarity

                   Bulk Commodity Chain
              Supplier                         Customer
                         Port Point-to-Point

           Consolidation
              center


                                      Complementarity

                Container
                  port

                               Pendulum         Intermodal
                                Services          terminal

             Containerized Commodity Chain

37
                    Commodities are more Containerized than
                    Expected …


                                     US Containerized Trade, 2003
                    25,000

                    20,000
                                                                    Food
     Thousand TEU




                    15,000                                          Consumer products
                                                                    Technology products
                    10,000                                          Capital equipment
                                                                    Raw materials
                     5,000

                        0
                             Total         Imports     Exports


38
             … Leading to the Setting of New
             Containerized Commodity Chains
     Shipping Time between Bulk Handling and Containerization (Canadian
     Wheat)
     Bulk Handling System    Days        Container System         Days
     Farm storage            Start       Farm storage             Start
     Local delivery          1           Local delivery           1
     Primary elevator        40          Intermodal terminal      2
     Rail hopper cars        11          Double stack train       2
     Export terminal         19          Container port           2
     Bulk ship               15          Containership            11
     Import terminal         10          Container port           2
     Local delivery          1           Local delivery           1
     Final customer          End         Final customer           End
39   Total                   97          Total                    21
          What Could be the Impacts on Commodity
          Markets?

     ■ Containerization and commodity markets
        • Futures / forward contracts are often conditioned by the
          capacity for delivery.
        • What would be the impacts of containerization on this market
          structure?
            • A contract could involve the allocation of containers.
        • What type of “price discovery” this would entail.
        • From futures to spot markets?
        • Transportation flexibility will increase financial flexibility.




40
                          Cold Chain Logistics is Getting Increasingly
                          Reliable

                                                          "Banana"                            "Banana"


                                                    Pharmaceutical          Pharmaceutical


                                                                Chill        Chill


                                    Frozen                   Frozen


                   Deep Freeze                       Degrees Celcius
                                                       Deep Freeze


                    -30           -20              -10                  0                    10          20


                                        Potential integrity breach
                                                                                     Temperature Range
     Temperature




                                                              Potential integrity breach
                    Time
41                          Transport        Unloading – Warehousing – Loading Transport
     Conclusion: Commodities on the Move…




42
     … Adapting to a Challenging Environment with many
     Opportunities

     ■ Global trade
        • Imbalances and dislocations.
     ■ Global commodity chains
        • Added value and value capture.
     ■ The “China Effect”
        • Trade and financial process.
     ■ Containerized commodity chains
        • Opportunities to rectify imbalances.
        • Setting of new commodity chains.
     ■ Global prospects
        • Positive for commodities.
        • New markets and investment opportunities.
43

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:13
posted:9/15/2011
language:English
pages:43