The Geography of Transport Systems

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Elements of an Economic System


Global Financial Centers


Industrial Agglomeration and Transportation


The World's 20 Largest Corporations by Market Value, 2007


Disconnection of Global Production and Distribution (Platform Corporation)


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


Sectors of American Imports of Asian Goods Through Maritime Container Shipping, 2004

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Commodity Chain


Commodity Chains and Added Value


Supply Chains, Transport Chains and Added Value


Product Life Cycle


Producer and Buyer-driven Commodity Chains


Characteristics of Producer-Driven and Buyer-Driven Global Commodity Chains


Level of Embeddedness of Production and Distribution


Global Production Networks

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Global Production Networks and Location Strategies


Changes in the Value of World Trade per Type of Merchandise, 1950-2005


Global Merchandises Exports by Product, 1990-2005


Geographical and Functional Integration


The Velocity of Freight


The Global Car Production Network, 2003


Modal Profile of Freight Transportation, United States


Benefits of Improved Freight Transportation


Commodity chains and Types of Transported Freight


Geographical Growth of a Multinational Corporation


NAFTA Transborder Truck Flows and Traffic at US Ports of Entry, 2002
Detailed PDF Map

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Flows in a Fordist and Post-Fordist Production System


Fordist and Post-Fordist Corporate Structure


Steel Wires, Port of Halifax
Google Earth Placemark


Reefer Containership entering the Zeebrugge Harbor
Google Earth Placemark


Cereals Supply Chain


The Automobile Supply Chain


The Cold Chain


Chapter 5 - Concepts (PowerPoint)

Commodity Chains and Freight Transportation

Author : Dr. Jean-Paul Rodrigue

1. Contemporary Production Systems

Production and consumption are the two core components of economic systems and are both interrelated through the conventional supply / demand relationship. Basic economic theory underlines that what is being consumed has to be produced and what is being produced has to be consumed. Any disequilibrium between the quantity being produced and the quantity being consumed can be considered as a market failure. On one side, insufficient production involves shortages and price increases, while on the other, overproduction involves waste, storage and price reductions. The realization of production and consumption cannot occur without flows of freight within a complex system of distribution that includes, modes, terminals, but also facilities managing freight activities, namely distribution centers.

Contemporary production systems are the outcome of significant changes in production factors, distribution and industrial linkages:

The development of global transportation and telecommunication networks, ubiquitous information technologies, the liberalization of trade and multinational corporations are all factors that have substantially impacted production systems. In many cases, so called "platform companies" have become new paradigms where the function of manufacturing has been removed from the core of corporative activities. Corporations following this strategy, particularly mass retailers, have been active in taking advantage of the "China effect" in a number of manufacturing activities.

2. Commodity Chains

Commodities are resources that can be consumed. They can be accumulated for a period of time (some are perishable while others can be virtually stored for centuries), exchanged as part of transactions or purchased on specific markets (such as futures market). Some commodities are fixed, implying that they cannot be transferred, except for the title. This includes land, mining, logging and fishing rights. In this context, the value of a fixed commodity is derived from the utility and the potential rate of extraction. Bulk commodities are commodities that can be transferred, which includes for instance grains, metals, livestock, oil, cotton, coffee, sugar and cocoa. Their value is derived from utility, supply and demand (market price).

The global economy and its production systems are highly integrated, interdependent and linked through commodity chains.

Commodity Chain. A functionally integrated network of production, trade and service activities that covers all the stages in a supply chain, from the transformation of raw materials, through intermediate manufacturing stages, to the delivery of a finished good to a market. The chain is conceptualized as a series of nodes, linked by various types of transactions, such as sales and intrafirm transfers. Each successive node within a commodity chain involves the acquisition or organization of inputs for the purpose of added value.

Commodity chains are thus a sequential process used by corporations within a production system to gather resources, transform them in parts and products and, finally, distribute manufactured goods to markets. Each sequence is unique and dependent on product types, the nature of production systems, where added value activities are performed, markets requirements as well as the current stage of the product life cycle. Commodity chains enable a sequencing of inputs and outputs between a range of suppliers and customers, mainly from a producer and buyer-driven standpoint. They also offer adaptability to changing conditions, namely an adjustment of production to adapt to changes in price, quantity and even product specification. The flexibility of production and distribution becomes particularly important, with a reduction of production, transaction and distribution costs as the logical outcome. The major types of commodity chains involve:

A significant trend has thus been a growing level of embeddedness between production, distribution and market demand. Since interdependencies have replaced relative autonomy and self sufficiency as the foundation of the economic life of regions and firms, high levels of freight mobility have become a necessity. The presence of an efficient distribution system supporting global commodity chains (also known as global production networks) is sustained by:

3. Freight Transport and Commodity Chains

As the range of production expanded, transport systems adapted to the new operational realities in local, regional and international freight distribution. Freight transportation has consequently taken an increasingly important role within commodity chains. Among the most important factors:

The results have been an improved velocity of freight, a decrease of the friction of distance and a spatial segregation of production. This process is strongly imbedded with the capacity and efficiency of international and regional transportation systems, especially maritime and land routes. It is becoming rare for the production stages of a good to occur at the same location. Consequently, the geography of commodity chains is integrated to the geography of transport systems. Among the main sectors of integration between transportation and commodity chains are:

Most commodity chains are linked to regional transport systems, but with globalization, international transportation accounts for a growing share of flows within production systems. The usage of resources, parts and semi-finished goods by commodity chains is an indication of the type of freight being transported. Consequently, transport systems must adapt to answer the needs of commodity chains, which forces a level of diversification. Within a commodity chain, freight transport services can be categorized by:

The globalization of the production is also concomitant – a by-product – of a post-fordist environment where just-in-time (JIT) and tense fluxes are becoming the norm in production and distribution systems. International transportation is shifting to meet the increasing needs of organizing and managing its flows through logistics. In spite of the diversity of transport services supported various commodity chains, containerization is adaptable enough to cope with a variety of cargo and time constraints.

Copyright © 1998-2008, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. Permission MUST be requested prior to use.

07/14/08