2021-2022 SUPPLY CHAIN MANAGEMENT AEI-M1-MCI

Part 4

Supply Chain and Logistics Management

Logistics and supply chain discussions can be found at all levels of the organizations today.

For years, logistics and supply chains were considered a cost center, but that all changed as
companies have seen from Wal-Mart, in its early years, and now with Amazon, that strong
supply chains create and drive a competitive advantage that is hard to compete against.

While both these companies are considered retailers, they are just as much logistics
companies driving value through their value proposition of getting the best product in the
hands of their customers quicker than their competitors. If the customer decides they made
a poor choice, then these companies also have figured out how to deliver the best return
process, as well. All-in, there are none better and the rest of the world is playing catch-up or
filing bankruptcy.

Often, the terms logistics and supply chains are considered synonymous, but they are not.

Definitions of Both Logistics & Supply Chains

Logistics is a subset of supply chains and is defined as the movement of goods within an
organization’s stakeholders from suppliers to manufacturing, to distribution centers, and
then finally to the end customer. The goal of logistics is to get the product from point A to
point B at the lowest cost with the best service.

logistics
1: the aspect of military science dealing with the procurement, maintenance, and
transportation of military materiel, facilities, food and personnel
2: the handling of the details of an operation the logistics of a political campaign

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How are logistics and logic related?

Logic, used strictly in the singular, is a science that deals with the formal principles of
reason. If a visitor walks in the house with wet hair, it is logical for one to assume that it is
raining outside. Logistics, which involves such concerns as the delivery of personnel or
supplies in an efficient manner, can often employ logic, such as by reasoning out the path
least likely to interrupt the flow of a delivery.

Both logic and logistics ultimately derive from the Greek logos, meaning "reason." But
while logic derives directly from Greek, logistics took a longer route, first passing into
French as logistique, meaning "art of calculating," and then into English from there.

Inbound and outbound logistics activities can be found within all organizations that are
product driven.

A supply chain, on the other hand, is the coordination, management and strategy that drives
the flow of data, information and logistics to deliver the best product and service to all
stakeholders in the process of converting raw goods to the end salable product.

A supply chain is the activity of coordinating the efforts among multiple organizations to
achieve success, not just the company selling the product to the end customer, so it
includes: sales, sourcing, procurement, production, logistics and customer service. The
system of organizations, departments, people, activities, information and resources in
moving a product from supplier to customer.

In a well-tuned supply chain, manufacturers, wholesalers, retailers and consumers are all
brought together in a free flow of product, service and communication to deliver the best
customer experience. This is where Amazon excels and continues to be on the cutting edge.

When the activities of a supply chain are brought together into a single vision, supply chain
management drives a competitive advantage by executing faster, reducing friction through
all points, being more transparent throughout the process, and finally, delivering beyond the
expectations of the end customer.

As described by Jeff Bezos, this process creates a flywheel effect. In effect, a flywheel at
standstill requires a great deal of effort to begin spinning, but once in forward motion it
begins to develop its own forward momentum making it increasingly easier to spin and
accelerate faster-and-faster with each of the next spins forward. Amazon thinks of its

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business of supply chain management in the same way where each time an employee
pushes the flywheel forward, it accelerates even faster for the end consumer.

Summary of Logistics and Supply Chain

To sum up logistics and supply chains, think of a football game where logistics is the game on
the field of play and the supply chain is the stadium where the game is played.

From the game perspective of the analogy, the movement of the ball up and down the field
of play to deliver a score is logistics.

The stadium, on the other hand, represents all the physical and communication
components. Think of the massive amounts of money put into a professional football
stadium to deliver the best experience for the buying customers (the fans). There is the
stadium itself, plus the communication points between coaches in the box to coaches and
players on the field. The communication network allows calls, still pictures and replay videos
to execute to the highest levels to score points and have the customers standing on their
feet cheering for more.

The feedback mechanism of scoreboards, referees, replay screens, and for those really into
the game, radio commentators (providing play-by-play and overall game analysis), give
feedback all along the way through a scoring drive to assist in delivering the very best
results.

The previous definitions help identify and unlock your company’s logistics and supply chain
strategies, so it can be transformed from a cost center to a competitive advantage by
covering the following topics in detail:

 Importance of a Strong Supply

 Characteristics of a Great Supply Chain
 Symptoms of a Challenged Supply Chain
 Supply Chain Technology
 Logistics Companies and Supply Chain Service Solutions
 Next Steps with Your Supply Chain

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Importance of a Strong Supply Chain

A company’s lifeblood is its supply chain, which makes it a differentiator in this highly
competitive business environment, as it touches every aspect of a company.

To succeed, a company has to embrace the customer, its suppliers and its employees to
create the right product, deliver it on-time, meet the financial expectations and consistently
improve upon on it with the flywheel concept fully engaged.

Six key components that are the result of supply chain excellence:

1. Customer Service Excellence

2. Reduces Operating Costs

3. Reduces Inventory Requirements

4. Improves Supplier & Vendor Performance

5. Improves Financial Results

6. Improves the Order-to-Cash Cycle

What is the Difference in Logistics & Supply Chain?

A supply chain is the network between a company and its suppliers and customers that
includes all the transactions involved in transforming raw goods into salable products.

The network includes the activities, people, technology, information and resources, while
the functional teams involved in the company’s network includes sales, sourcing,
procurement, production, logistics and customer service.

Logistics and logistics management is a subset of processes that fall under supply chain
management that plans, executes, reports and coordinates the movement of goods within
an organization’s network of stakeholders.

The goal of logistics is to get the product from point A to point B at the lowest cost with the
best service.

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A supply chain, on the other hand, is the coordination, management and strategy that drives
the flow of data, information and logistics to deliver the best product and service to all
stakeholders in the process of converting raw goods to the end salable product.

When the activities of a supply chain are brought together into a single vision, supply chain
management drives a competitive advantage by executing faster, reducing friction through
all touch points between internal and external stakeholders, thus bringing more
transparency and efficiencies throughout the process to deliver the end product to the
ultimate customer in a manner that exceeds their expectations.

To sum up logistics and supply chains, think of a football game where logistics is the game on
the field of play and the supply chain is the stadium where the game is played.

What is Logistics and Supply Chain Management?

"Logistics typically refers to activities that occur within the boundaries of a single
organization and Supply Chain refers to networks of companies that work together and
coordinate their actions to deliver a product to market. Also, traditional logistics focuses its
attention on activities such as procurement, distribution, maintenance, and inventory
management. Supply Chain Management (SCM) acknowledges all of traditional logistics and
also includes activities such as marketing, new product development, finance, and customer
service".

What is Logistics?
Logistics is about getting the right product, to the right customer, in the right quantity, in the
right condition, at the right place, at the right time, and at the right cost.

In the past, various tasks were under different departments, but now they are under the
same department and report to the same head as below,

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What is Logistics Management?

Logistics Management deals with the efficient and effective management of day-to-day
activity in producing the company's finished goods and services.

What is Supply Chain?

Supply Chain is the network of organizations that are involved, through upstream and
downstream linkages, in the different processes and activities that produce value in the form
of products and services in the hands of the ultimate consumer.

What is Supply Chain Management?

Supply Chain Management (SCM) refers to the coordination of production, inventory,
location, and transportation among the participants in a supply chain to achieve the best mix
of responsiveness and efficiency for the market being served.

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What is the Difference Between Inbound and Outbound Logistics?

Inbound Logistics refers to movement of goods and raw materials from suppliers to your
company. In contrast, Outbound Logistics refers to movement of finished goods from your
company to customers.

To illustrate this term, see the graphic as below,

As you can see, purchasing and warehouse (distribution center) communicates with
suppliers and sometimes called "supplier facing function". Production planning and
inventory control function is the center point of this chart. Customer service and transport
function communicates with customers and sometimes called "customer-facing functions.

What is Transport and Logistics?

Transport and Logistics refers to 2 types of activities, namely, traditional services such as
air/sea/land transportation, warehousing, customs clearance and value-added services
which including information technology and consulting.

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What is International Logistics?

These are one of the most ambiguous groups of terms in international business out there.
They are used interchangeably with international supply chain or international production
and transportation activities. However, the most concise definition is as below,
International Logistics focuses on how to manage and control overseas activities effectively
as a single business unit. Therefore, companies should try to harness the value of overseas
product, services, marketing, R&D and turn them into competitive advantage.

What is Third Party Logistics or 3PL?

The concept of 3PL appeared on the scene in the 1980s as the way to reduce costs and
improve services which can be defined as below.
Third Party Logistics or 3PL refers to the outsourcing of activities, ranging from a specific
task, such as trucking or marine cargo transport to broader activities serving the whole
supply chain such as inventory management, order processing and consulting.

In the past, many 3PL providers didn't have adequate expertise to operate in complex supply
chain structure and process. The result was the inception of another concept.

What is Fourth Party Logistics or 4PL?

The 4PL is the concept proposed by Accenture Ltd in 1996 and it was defined as below:
Fourth Party Logistics or 4PL refers to a party who works on behalf of the client to do
contract negotiations and management of performance of 3PL providers, including the
design of the whole supply chain network and control of day-to-day operations.

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Is a 4PL provider really needed?

The top 3 reasons why customers would like to use 4PL providers are as below,

1- Lack of technology to integrate supply chain processes

2- The increase in operating complexities

3- The sharp increase of the operations in the global supply chains

What is Supply Chain Network?

Many companies have the department that controls supply chain activity so they believe
that SCM is a "function".

Some companies think SCM is a kind of management system under IT (information system or
enterprise resource planning.) In fact, SCM is actually a "network" consists of many players
as below:

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A generic supply chain structure is as simple as Supplier, Manufacturer, Wholesaler and

Retailer (it's more complex in the real world but a simple illustration serves the purpose).

The word "management" can be explained briefly as "planning, implementing, controlling,

monitoring". Supply Chain Management (in supply chain education context) is then the
planning, implementing and controlling the networks.

What is Information Sharing?

Another important attribute of supply chain management is the flow of material,

information, and finance (these are thing that can be found in lean manufacturing and six
sigma project too).

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Even though there are 3 types of flow, the most important one is information flow also
known as information sharing. Let's see the example of this through the simplified version of
the bullwhip effect as below:

When customer demand data is not shared, each player in the same supply chain must make
some sort of speculation and this can become the management issues.

According to the above graphic, the retailer has a demand for 100 units, but each player
tends to keep stock more and more at every step of the way. This results in higher costs for
everyone in the same supply chain.

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When information is shared via demand management from retailer down to supplier,
everyone doesn't have to keep stock that much. The result is a lower cost for everyone.

This is sometimes called the extended supply chain or supply chain visibility.

Information sharing will also reduce the needs to use the digital transformation solution
such as supply chains systems, digital supply chain, predictive analytics or artificial
intelligence.

What is Supply Chain Coordination?

Information sharing requires a certain degree of "coordination" (it's also referred to as

collaboration or integration in scholarly articles).

Do you wonder when people started working together as a network?

In 1984, companies in the apparel business worked together to reduce overall lead-time.
In 1995, companies in the automotive industry used Electronic Data Interchange to share
information.

So, working as a "chain" is the real-world practice.

What are Conflicting Objectives?

Working as a network requires the same objective, but this is often not the case (even with
someone in the same company).

"Conflicting Objectives" is the term used to describe the situation when each function wants
something that won't go well together. For example, purchasing people always place the
orders to the cheapest vendors (with a very long lead-time) but production people or project
manager need material more quickly.

To avoid conflicting objectives, you need to decide if you want to adopt a time-based
strategy, low-cost strategy or differentiation strategy. A clear direction is needed so people
can make the decisions accordingly.

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What is the Cost/Service Trade-off?

The concept of Cost/Service Trade-off appeared as early as in 1985 but it seems that people
really don't get it.

When you want to improve service, the cost goes up. When you want to cut cost, service
suffers. It's like a "seesaw", the best way you can do is to try to balance both sides.

Real-world example is that a "new boss" ask you to cut costs by 10%, improve service level
by 15%, double inventory turns so the financial statement looks good. If you really
understand the cost/service trade-off concept, you will agree that you can't win them all.
The most appropriate way to handle this is to prioritize your KPIs.

What is Supply Chain Relationship?

To work as the same team, long-term relationship is the key.

Otherwise, you're just a separate company with a different strategy/agenda.

So academia keeps preaching about the importance of relationship-building but is not for
everyone.

Since there are too many suppliers to deal with, a portfolio matrix is often used to prioritize
the relationship-building to create supply chain partners.

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Focus your time and energy to create a long-term relationship with suppliers of key products
and items with limited sources of supply (or items with high supply chain risk.) Because
people and human resource are the factors that can make or break your supply chain.

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Part 5

Means of Transport.

Difference Between Transportation and

Logistics?

Logistics comprises all tasks for planning, controlling, providing and optimizing processes
along the value chain.

Transport logistics comprises the complete approach to all processes in logistics that are
necessary to conduct a transport.

It deals with the interaction of:

 Administrative variables such as personnel management, vehicle management
 Planning variables, e.g. transport control, transport strategies
 Operational variables such as transport technology, data transmission technology

Tasks and objectives of transport logistics

The task of transport logistics is to distribute and provide goods at the lowest possible cost
in the production process.
The goal is to optimize transports in terms of loading, unloading, capacity utilization,
handover and identification.
It comprises the complete consideration of all processes in logistics that are necessary for a
transport.

This includes the consideration of two networks:

 Supply network
 Distribution network

A supplier network describes which types of suppliers play a role in the supply process.
A distribution network describes the spatial structure in which the distribution processes are
implemented.

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Logistics and transportation are two very important parts of transportation and distribution services,
and they are different.

Transportation is the movement of goods and logistics is the management of the inward and
outward transportation of goods from the manufacturer to the end user.

These terms are often used interchangeably, but they are two extremely different part of the supply
chain.
Logistics and transportation deals with getting products and services from one location to another.
Although logistics and transportation are used interchangeability, the differences are simply logistics
deals with the integration of storage, transportation, cataloging, handling, and packaging of goods.
Transportation deals with the function of moving products from one location to another.

Logistics
Logistics is obtaining, producing, and distributing materials and products in the right qualities and to
an end user.
Logistics includes the science of planning for managing and implementing procedures for the most
efficient and effective storage and transportation of goods and services.
Services and other information from the source point to the consumer is sent through logistics
channels to meet and fulfill customer needs.

Logistics has added benefits and functions that are different from transportation services.

Logistics managers need to make decisions based on packaging, containerization, documentation,

and insurance, storage, importing and exporting, regulations, and freight damage.
They also deal with work and collaborating, claims, managing vendors and partners, and risk
mitigation.

Important tips for effective logistics management include:

Proper planning is the first step to accomplishing a task.
Planning involves obtaining the products, facilities to store the good before delivery, and
transportation of products to the end users.
Automaton plays a major role in increasing the efficiency of a transportation company. Automation
has a vital role in optimization.
Value relationships or the team is an essential aspect of a transportation organization. The team is
responsible for growth. From the delivery guy or the warehouse manager, logistics means training
employees and having a logistics manager with interpersonal skills.
Logistics requires an emergency back up plan and a reliable person who can sort out problems and
issues.
Warehouse management is part of effective logistics management. Warehouse operations are
dependent on the type of goods you are handling as well as the logistics manager.

A good logistics network optimization needs to integrate analysis, feedback, and measurement.
When a logistic manager deploys new strategies in the system, you need to analyze the output.

Analyzation is important as it regulates the success or failure of the industry.

Adapt the latest technology and innovative approaches to transportation and distribution services.

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Effective logistics management is constantly evolving to improve the efficiency of operations,

ensuring customer satisfaction, and increasing productivity.

Transportation Services
Efficient transportation is important to the survival of a transportation and distribution service.
Efficient transportation should be analyzed for the best delivery route, as well as cost-effective
packaging that ensures low investment and safety of goods.

Transportation services include the movement of goods and services, people, and animals from one
location to another by rail, road, air, sea, cable, space, or pipeline.
Transportation services can be divided into three different areas: infrastructure, vehicles, and
operations.
Transportation allows communication and trade between the two parties.
When planning the shipment process, the method of transportation is a significant consideration.

You need to determine the costs, how important is it to get the shipment to the end user in what
period, the value of the goods as well as the size and weight of the goods.
The road freight is one of the most common and used of all modes of transport. Road transportation
has several advantages because of:
 Cost-effectiveness
 Quick and scheduled delivery
 Flexible service
 Track and trace of cargo and the truck
 Complete door-to-door services
 One of the most economical means of transportation for goods and services.

As new technologies are discovered and improved, there has been an enormous impact on
transforming both the transportation industry as well as the logistics industry.

Technology has allowed real-time monitoring of flow and resources and transparency across multiple
points. Technology has provided a seamless exchange of operational information with key
performance indicators that have streamlined and organized the industry.

In the highly competitive transportation and distribution service industry, it is imperative that
information and physical products move with efficiency and at lower costs.

Customers are demanding improved services that only technology can provide.

Successful supply chain management and logistics are the difference between surviving and success
in transportation and distribution services.

As the supply chain management, logistics system is improved, immediate benefits can be seen in
terms of lower transportation costs and optimized deliveries.

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International Trade, Transportation Chains and Logistics

International Trade, Transportation Chains and Logistics

Source: Rodrigue, J-P (2012) “Supply Chain Management, Logistics Changes and the Concept
of Friction”, in P.V. Hall and M. Hesse (eds) Cities, Regions and Flows, London: Routledge.
ISBN 978-0-415-68219-0.

International trade is based on the notion of exchange, which involves what is being traded,
the partners involved as well as the transactional environment in which trade takes place,
namely customs procedures (tariff and non-tariff barriers). International trade is seen as a
series of commercial transactions between trade partners that tracks the value of what is
being traded and the types of goods these transactions involve. Classification regimes. such
as the standard international trade classification, allow for well-defined trade categories to
which customs rules can be applied. The extent of trade, either in value or volume, is an
abstract expression of the quantity of goods being exchanged as they do not represent the
actual physical flows supporting trade transactions.

The physical realization of international trade requires a transport chain. It is a series of

logistical activities that organize modes and terminals, such as railway, maritime, and road
transportation systems, and thus the continuity along the supply chain through a set of
stages, the most common being:

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 The first stage in the transport chain is composition, where loads are assembled at the
origin, often on pallets and containers. Composition is an important process as it tries to
achieve economies of scale over a transport chain by providing larger and easier to handle
load units necessary for international trade.
 The cargo being traded then moves along the transport chain using a transport mode,
commonly rail or road, to reach a terminal where it is transshipped on an international
transport mode (port or airport depending on the nature of what is being transported).
Additional economies of scale become possible as several load units can be consolidated into
a single large shipment, such as a containership.
 Once cargo enters another country through a gateway (point of entry), customs inspection
takes place as the cargo is transshipped over the inland transport system. Customs
procedures and delays are among the most constraining factors in global freight distribution.
 The final stage of the transport chain, decomposition (the last mile), occurs in proximity to
the final destination. Loads are broken down into units corresponding to effective demand,
such as store orders. If the demand concerns retail goods, urban freight distribution
strategies may be required.

In the operational reality of modes and terminals, international trade is a series of physical
flows that may not necessarily use the most direct path but the least cost path. Inland
corridors where economies of scale are more effective shape the structure of freight flows
and the selection of the port of exit. On the maritime side, transshipment hubs have become
strategic intermediary locations helping consolidate maritime flows and connecting different
maritime systems of circulation. In such a setting, the container has become the
fundamental element facilitating transfers between modes and supporting international
trade flows. Distribution centers play an important role in physical flows since they can act
as a buffer, helping reconcile the temporal and spatial requirements of demand.

Trade, Logistics and Freight Distribution

Globalization, trade, and freight distribution are interrelated and concern a mobility scale
that spans regions, nations, and often continents. This transnational mobility is subject to
many geopolitical considerations, such as who controls trade routes and what forms of
competition and cooperation have emerged with expanded trade relations. Processes
related to economic integration, the fragmentation of production systems due to
outsourcing and offshoring are interdependent. They favored the setting of global
commodity chains, from the extraction of raw materials, manufacturing, to final
consumption. This requires an understanding of logistics and the growing level of integration
between production, distribution, and consumption.

Transborder and Crossborder Transportation

Cross-border transportation involves the activities, infrastructures, and flows that support
the passage of passengers and freight across an international border.
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1. International Transportation

The growth of the amount of freight being traded as well as a great variety of origins and
destinations promotes the importance of international transportation as a fundamental
element supporting the global economy. Economic development in Pacific Asia and China, in
particular, has been the dominant factor behind the growth of international transportation
in recent years. Since the trading distances involved are often considerable, this has resulted
in increasing demands on the maritime shipping industry and port activities. As its industrial
and manufacturing activities develop, China is importing growing quantities of raw materials
and energy and exporting increasing quantities of manufactured goods. The ports in the
Pearl River delta in Guangdong province now handle as many containers as all the ports in
the United States combined.

International transportation systems have been under pressure to support additional

demands in freights volume and the distance at which this freight is being carried. This
could not have occurred without considerable technical improvements permitting to
transport larger quantities of passengers and freight, and this more quickly and more
efficiently. Few other technical improvements than containerization have contributed to this
environment of growing mobility of freight. Since containers and their intermodal transport
systems improve the efficiency of global distribution, a growing share of general cargo is
containerized.

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Evolution of Containerships

Consequently, transportation is often referred to as an enabling factor that is not necessarily

the cause of international trade but as a condition without which globalization could not
have occurred. A common development problem is the inability of international
transportation infrastructures to support flows, undermining access to the global market,
and the benefits derived from international trade. International trade also
requires distribution infrastructures that can support trade between several partners. Three
components of international transportation facilitate trade:

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 Transportation infrastructure. Concerns physical infrastructures such as terminals, vehicles,

and networks. Efficiencies or deficiencies in transport infrastructures will either promote or
inhibit international trade.
 Transportation services. Concerns the complex set of services involved in the international
circulation of passengers and freight. It includes activities such as distribution, logistics,
finance, insurance, and marketing.
 Transactional environment. Concerns the complex legal, political, financial, and cultural
setting in which international transport systems operate. It includes aspects such as
exchange rates, regulations, quotas, and tariffs, but also consumer preferences.

About half of all global trade takes place between locations of more than 3,000 km apart.
Because of this geography, most international freight movements involve several modes
since it is impossible to have a physical continuity in freight flows. Transport chains must
thus be established to service these flows, which reinforce the importance of intermodal
transportation modes and terminals at strategic locations. Among the numerous transport
modes, two are specifically concerned with international trade:

 Ports and maritime shipping. The importance of maritime transportation in global freight
trade in unmistakable, particularly in terms of tonnage, as it handles about 90% of the global
trade. Thus, globalization is the realm of maritime shipping, with containerized shipping at
the forefront of the process. The global maritime transport system is composed of a series of
major gateways granting access to major production and consumption regions. Between
those gateways are major hubs acting as points of interconnection and transshipment
between systems of maritime circulation.
 Airports and air transport. Although in terms tonnage air transportation carries an
insignificant amount of freight (0.2% of total tonnage) compared with maritime
transportation, its importance in terms of the total value is much more significant; 15% of
the value of global trade. International air freight is about 70 times more valuable than its
maritime counterpart and about 30 times more valuable than freight carried overland, which
is linked with the types of goods it transports (e.g. electronics). The location of freight
airports corresponds to high technology manufacturing clusters as well as intermediary
locations where freight planes are refueled and cargo is transshipped.

 Modal Shares of
World Trade by Volume and Value, 2008

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
World’s Major Container Ports, 2015

Road and railway modes tend to occupy a more marginal portion of international
transportation since they are above all modes for national or regional transport services.
Their importance is focused on their role in the “first and last miles” of global distribution.
Freight is mainly brought to port and airport terminals by trucking or rail. However, there are
notable exceptions in the role of overland transportation in international trade. A substantial
share of the NAFTA trade between Canada, the United States, and Mexico is supported by
trucking, as well as a large share of the Western European trade. The developing rail and
road connections in Eurasia, spearheaded by China, also involved additional overland
international trade. Despite this, these exchanges are regional by definition, although
intermodal transportation confers a more complex interpretation of the geographical scale
of these flows.

2. International Transportation and Geopolitics

The basic features of international transportation are constrained by its geography, which
involves geopolitical considerations. In the past, many conflicts took place to gain control
over trade routes, to gain control over mineral or energy deposits, to gain colonial control
over untapped regions, or to set trade routes via existing ocean ports. This has been
particularly important for maritime nations seeking to support the existing trade, expand it,
and secure its circulation. Throughout history, passages were subject to conflicts that
generally aimed to assure the control of a strategic location.

“Whosoever commands the sea commands trade; whosoever commands the trade of the
world commands the riches of the world, and consequently the world itself”
Sir Walter Raleigh (c1610)

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International transport infrastructures, such as ports, airports, and canals were also subject
to geopolitical considerations as they can provide access to strategic resources or key
markets. The geopolitics of international transportation can be considered from five
perspectives.

a. Conquest and Conflicts

Transport technology was initially a means to control and conquer oceans, territories, and
resources. From the 16th century, European powers were the first to improve significantly
maritime technology in terms of military potential. They were thus able to establish
maritime trading routes and colonies all over the world, a process that accelerated in the
mid of the 19th century. This period of early globalization was thus characterized by the
usage of military advantages of European colonial powers to access markets and resources
to their advantage. The railroad was also mean to achieve territorial conquest, notably in
North America (nation-building) and in Africa (colonialism).

As warfare started to take place at a broader scale in the 19th century, the need for efficient
transportation and logistics became even more apparent. The role of transportation in
supporting international conflicts enabled three crucial aspects. First, it allowed a faster
mobilization and deployment of military units. Second, it enabled their strategic and
operational mobility in theaters of conflicts. Third, it allowed their resupply in all the goods
crucial for their continuing operation, such as food, fuel, and ammunition.

b. Competition

International transportation is a mean to compete in the global economy. Traditionally,

through cabotage regulations, many nations reserved the right to carry national passengers
and freight to national transport companies. For freight, this is often associated with empty
flows on the return trip. Although cabotage regulations are still prevalent for air (air
freedoms) and maritime transportation (e.g. Jones Act), competition has become a prevalent
force in shaping modern transportation systems.

For several countries, the development of their international transport system has favored
exports and transport-related activities such as shipbuilding, trade, and insurance. For
instance, emerging maritime nations in East Asia, such as South Korea, Taiwan, and now
China, have grown using this strategy. A new form of international transport competition is
related to the usage of flags of convenience, where a maritime company can significantly
reduce its costs by using the fiscal advantages of another country.

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Supply Chains, Transport Chains and Added Value

Supply Chains, Transport Chains and Added Value

In a supply chain, from suppliers to customers, and through all the intermediary stages, it is a
matter of how each added value function takes place. For many sectors, added value
activities have moved downward the supply chain as a strategy to lower production (input)
costs. In other cases, added value activities have moved upward to expand market
potential, mainly through better freight distribution strategies. In almost all cases, improving
the efficiency of freight distribution is a salient factor of added value. The structure of
transport chains underlines where specific locations (gateways, regions, localities, etc.) can
capture, expand, and retain value-added activities. It is in this context that policies,
regulations, and investments are articulated for the expected multiplying effects related to
value capture. Since many supply chains are globally oriented, the added value is performed
at a wide array of locations, which is the outcome of decisions made by multinational
corporations to maximize their revenue.

Regions, such as North America, Japan, and Europe, have seen a “devaluation” of several of
the supply chains they are involved with. For the retailing sector, most added value activities
related to production have been off-shored, and the added value performed in North
America mainly concerns distribution; how to move finished goods to a wide array of
markets.

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Industrial Agglomeration and Transportation

Industrial Agglomeration and Transportation

There are two opposite spatial characteristics for production systems in terms of their level
of concentration:

 Diffused production. Represents industrial activities gaining from specific local/regional

comparative advantages, such as access to resources or labor. Its main drawback resides in
the linkages between the elements that can be difficult to maintain if transport costs are high
or if transportation has insufficient physical capacity. This system can also be a reflection of
relative autarky for multidomestic production systems.
 Agglomerated production. Represents industrial activities taking advantage of increased
interactions when they locate in proximity, also known as economies of agglomeration. This
leads to the setting of manufacturing clusters where transportation and coordination costs
are lower. Linkages between zones of agglomeration are generally serviced by high capacity
transport corridors between terminals such as ports, airports, or rail yards. If this process
occurs over a period of time, manufacturing clusters may emerge through cumulative
agglomeration.

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Transportation Modes

Transportation modes are essential components of transport systems since they are the
means of supporting mobility. Modes can be grouped into three broad categories based on
the medium they exploit: land, water, and air. Each mode has its own requirements and
features and is adapted to serve the specific demands of freight and passenger traffic. This
gives rise to marked differences in how the modes are deployed and utilized in different
parts of the world. More recently, there is a trend towards integrating the modes through
intermodality and linking the modes ever more closely into production and distribution
activities. At the same time, however, passenger and freight activity is becoming increasingly
separated across most modes.

Transportation modes are:

- Transportation Modes, Modal Competition and Modal Shift

- Road Transportation
- Rail Transportation and Pipelines
- Maritime Transportation
- Air Transport
- Intermodal Transportation and Containerization

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Domains of Maritime Circulation

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