Transcript Logistics and Global Commodity Chains

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: [email protected]
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
Fragmentation
1980s
Consolidation
1990s
2000s
Logistics
Supply Chain
Management
Functional Integration Value Capture
Demand Forecasting
Purchasing
Requirements Planning
Production Planning
Materials
Management
Manufacturing Inventory
Warehousing
Warehousing
Materials Handling
Materials Handling
Packaging
Packaging
Inventory
Distribution Planning
Order Processing
Transportation
3
Customer Service
Physical
Distribution
Information Technology
Marketing
Strategic Planning
Intermediate Goods
Final Goods
Parts and raw
materials
Manufacturing
and assembly
Distribution
Bulk shipping
Flows
4
Unit shipping
LTL shipping
Market
Stage
Commodities
Transport Chain
High volumes
Low frequency
Average volumes
High frequency
Market
… and the Setting of Commodity Chains
Low volumes
High frequency
Major Factors Driving the Integration of
Transportation with Distribution
5
Factor
Cause
Consequence
Technology
Containerization & IT
Modal and intermodal
innovations; Tracking shipments
and managing fleets
Capital
investments
Returns on investments
Highs costs and long
amortization; Improve utilization
to lessen capital costs
Alliances and
M&A
Deregulation
Easier contractual agreements;
joint ownership
Commodity
chains
Globalization
Coordination of transportation
and production (integrated
demand)
Networks
Consolidation and
interconnection
Multiplying effect
Changes in Global Trade

Acute Trade Imbalances
Economic Cycles
Globalization and Production
6
Container yard, Port of Yantian, China
A Changing Trade Environment…
7
Stage
Nature
Function
Until the 1970s
Immobile factors of
production
Cope with scarcity
Late 20th century
Mobility of factors of
production
Promote economic
efficiency
Early 21st century
Global production
networks
Added value within
commodity chains
… 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
-5
8
-10
04
20
02
20
00
20
98
19
94
92
96
19
19
19
90
19
88
19
86
19
84
19
82
19
78
76
80
19
19
19
74
19
72
19
70
19
68
19
64
62
66
19
19
19
60
19
58
19
56
19
54
19
52
19
19
50
0
The Cycle is Strongly Upward for Latin
America…
Latin American Trade (1995-2005) Billions USD
400
Commodities Boom
350
300
250
200
150
100
Exports
Imports
50
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
Imports
1.5
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
Exports
Canada
Italy
United Kingdom
Netherlands
France
Japan
China
United States
Germany
0
11
200
400
600
800
1,000
Billions of $US
1,200
1,400
1,600
1,800
… that Resulted in Imbalanced Containerized
Freight Flows …
Balance of Containerized Cargo Flows along Major Trade
Routes, 1995-2006
0
-2
1995
1996
1997
-4
-6
-8
-10
-12
-14
12
-16
-18
Europe/USA
Asia/Europe
Asia/USA
1998
2000
2001
2002
2003
2004
2005
2006
… 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
2005-4
2005-2
2004-4
2004-2
2003-4
2003-2
2002-4
2002-2
2001-4
2001-2
2000-4
2000-2
1999-4
1999-2
1998-4
1998-2
1997-4
1997-2
1996-4
1996-2
1995-4
1995-2
1994-4
1994-2
1993-4
$0
Globalization; Changing the Profit Structure…
High
Globalization
Added value
R&D
Sales / Service
Marketing
Branding
Concept
Distribution
Design
Manufacturing
Low
Commodity chain
14
Logistics
… As Well As Disconnecting Production and
Distribution
R&D
Distribution
Core
Base
Manufacturing Base
15
Marketing / Retail
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
Services
Corridor
Intermodal
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
outputs (batches)
Flow management (time-based),
warehousing unit
Production
Distribution
Container
Transport
18
Modes, terminals, intermodal and
transmodal operations
Connecting the Dots: Intermodal Transport
Chain
Composition
‘Last mile’
Interchange
Transfer
Decomposition
‘First mile’
Local / Regional Distribution
National / International Distribution
19
Transport Terminal
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
Long Beach
New York/New Jersey
Oakland
Hampton Roads
Charleston Savannah
Los Angeles
Dubai
Jeddah
Nhava Sheva
Salalah
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
Quingdao Dalian
Port Kalang
Tanjung PelepasSingapore
Hamburg
Bremen/Bremerhafen
Rotterdam
Antwerp
Felixstowe
Tianjin
Laem Chabang
Ho Chi Minh
Hong Kong Shenzhen
Guangzhou
Xiamen
LeHavre
Shanghai
Ningbo
Busan
Kaohsiung Keelung
Kobe
Nagoya
Tanjung Priok
Manila
Tokyo
Yokohama
Barcel ona
Valencia
Gioia Tauro
24
Algeciras
… 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
25
Europe
Port Authority
… That are Following a “Value Capture”
Strategy
Maritime Services
Port Services
Inland Services
Port Holding
Vertical Integration
Maritime
Shipping
26
Port Terminal
Operations
Horizontal Integration / Vertical
Inland Modes
and Terminals
Commodity Chain
Distribution
Centers
Where the Going Gets Tough: The “Last Mile”
in Freight Distribution
Massification
Atomization
Frequency
Capacity
HINTERLAND REGIONAL LOCAL
GLOBAL
Shipping Network
Corridor
Gateway
27
Segment
Inland
Terminal
Distribution
Center
Customer
“Last Mile”
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%
29
10%
20%
30%
40%
50%
… as Well as the Largest Buyer Financing
Scheme in History…
USD
$ for goods
Unemployment
Investment
Goods
Interest Rates
Borrowing
Bonds (IOUs)
Reserves
China
30
$ for bonds
USD
Asset Inflation
Debt
United States
… Where Exchange Rates were Used as
Leverage
Yuan Exchange Rate ( per USD) , 1981-2007
9
Yuan per USD
Real per USD
8
7
6
5
Discount Window
Export Oriented
Debasement
Closing of the
Discount Window
4
3
2
31
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
0
1981
1
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
Atlantic Express (ATX)
Oakland
Los Angeles
New York
Norfolk
Charleston
27 Days
Hamburg
Le Havre
Rotterdam
Southampton
Fos Genoa
Barcelona
South China Express (SCX)
European Union / Mediterranean (EUM)
Tokyo
Ningbo Shanghai
Kaohsiung
Hong Kong
39 Days
Laem Chabang
49 Days
Note: Paths are approximate
Three Major Pendulum Routes Serviced by OOCL, 2006
Atlantic Express (ATX)
Origin
Southampton
New York
Norfolk
Charleston
Rotterdam
Hamburg
Le Havre
Destination
New York
Norfolk
Charleston
Rotterdam
Hamburg
Le Havre
Southampton
33
Note: Transit time includes port time
Singapore
Port Kelang
European Union / Mediterranean (EUM)
Transit Time (days)
8
2
2
10
2
2
1
Origin
Port Kelang
Genoa
Barcelona
Fos
Singapore
Hong Kong
Shanghai
Ningbo
Shekou
Hong Kong
Singapore
Destination
Genoa
Barcelona
Fos
Singapore
Hong Kong
Shanghai
Ningbo
Shekou
Hong Kong
Singapore
Port Kelang
Transit Time (days)
14
2
2
15
4
2
2
2
1
4
1
South China Express (SCX)
Origin
Tokyo
Kaohsiung
Shekou
Laem Chabang
Singapore
Kaohsiung
Los Angeles
Oakland
Destination
Kaohsiung
Shekou
Laem Chabang
Singapore
Kaohsiung
Los Angeles
Oakland
Tokyo
Transit Time (days)
4
1
4
3
3
11
4
9
Source: OOCL Web Site
Eq
ua
to
r
… Which Implies the Emergence of Global
Trade Highways
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.
35
• Rise in commodity prices makes them increasingly suitable
for containerization.
… Where Each System has its own
Advantages …
36
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
… Will Likely See the Emergence of a
Complementarity
Bulk Commodity Chain
Supplier
Port Point-to-Point
Customer
Consolidation
center
Complementarity
Container
port
Pendulum
Services
Intermodal
terminal
Containerized Commodity Chain
37
Commodities are more Containerized than
Expected …
US Containerized Trade, 2003
25,000
Thousand TEU
20,000
Food
Consumer products
Technology products
Capital equipment
Raw materials
15,000
10,000
5,000
0
Total
38
Imports
Exports
… Leading to the Setting of New
Containerized Commodity Chains
Shipping Time between Bulk Handling and Containerization (Canadian
Wheat)
39
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
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
Degrees
Celcius
Deep Freeze
Deep Freeze
-30
Frozen
-20
-10
0
10
Potential integrity breach
Temperature
Temperature Range
Potential integrity breach
Time
41
Transport
Unloading – Warehousing – Loading Transport
20
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