2004 Conference of the Association of AmericanGeographers, Philadelphia

Challenging the Derived Transport Demand: Geographical Issues in Freight Distribution

Jean-Paul Rodrigue, Hofstra University, New YorkA. Challenges to Derived Transport DemandB. Integrated Transport DemandC. Disciplinary Concerns

Email: ecojpr@hofstra.eduPaper available at:http://people.hofstra.edu/faculty/Jean-paul_Rodrigue

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?

A

B

Supply/Origin

Demand/Destination

A

B

Transport(Derived)

Transport(Integrated)

A – Challenges to Derived Transport Demand

1) Operational scale Global flows; local hubs

2) Supply / Demand Relationships

Demand-driven system

3) Functional integration Growing level of functional integration in supply chains

4) Distribution centers Core element of the supply chain

5) Time component Time often a more important component than costs

1 – Operational Scale

Introduction(isolation / proprietary) Integrated demand

Op

era

tion

al S

cale

MP

Number of hubs

Log

Time

Expansion andinterconnection

Standardizationand integration

A B C D

Local

Regional

GlobalNational/Continental

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.

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.

Changes in the Relative Importance of Logistical Functions

0% 20% 40% 60% 80% 100%

Inventory

Transport System

Information System

Demand Driven

Supply Driven

Percentage of Manufacturers Using 3PLP, United States

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

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

Shipping Line

ShippingAgent

Stevedore

CustomAgent

FreightForwarder

Rail / Trucking

Depot

Trucking

Megacarrier

Econ

omie

s of

sca

le

Land DistributionMaritimeDistribution

Level of functional integration

4 – Distribution Centers

■ 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

DC

Suppliers

Customers

Industrial Geography

Commercial / Retail Geography

Geography of Distribution

National Semiconductors, Supply Chain, 1993-2001

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Regional Distribution Centers (1993)

Global Distribution Center (2001)

Wafer Fabrication Assembly & Testing Distribution Center

Singapore

Portland

Salt Lake City

Santa Clara

Arlington

Greenock

Swindon

Midget Haemek

Tokyo

Hong Kong

Cebu

Bangkok

Penang

MalaccaToa Payoh

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.Tran

spor

t Cos

ts (T

C)

Time (T)

T1 T2T

TC

Valu

e of

tim

e (V

T)

VT

Time and Cost of Transport Activities Involving Moving a 40 Foot Container between the American East Coast and Western Europe

0 20 40 60 80 100 120 140 160

Moving container from loading ramp to storage

Container waiting for pickup after stuffing

Loading container on road trailer

Road transport to port terminal

Waiting for admission to port terminal

Transfer from road trailer to stack

Waiting in stack

Unstacking and transfer to terminal trailer

Transfer/loading onto ship

Containership travel time (NY-Rotterdam)

Tranfer/unloading off ship

Transfer to stack

Waiting in stack

Tranfer from stack to road trailer

Clearance and inspection

Road transport, port terminal to inland depot

Unloading container at inland depot

Storage at inland depot

Moving container to consignee

0 200 400 600 800 1000 1200 1400 1600 1800 2000

Time (hours)

Cost ($US)

Cumulative Cost and Time of Moving a 40 Foot Container between the American East Coast and Western Europe

0

500

1000

1500

2000

2500

3000

3500

0 100 200 300 400 500

Cumulative time (hours)

Cum

ulat

ive

cost

(US$

)

B – Integrated Transport 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

Integrated Demand

Multi-scale networks

Demand

Supply chain

DCs

Time component

B – Level of Derived Demand

Energy / Raw materials Semi-finished products Manufactured goods

Extraction

TransferProcessing

Intra-industrial linkages

ManufacturingRetailing

Distribution

High Average to Low Low

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.