The Commodity Chain

There are several stages through which a multinational corporation (or a group of corporations in partnership) can articulate its commodity chain. These stages are in large part conditioned by the location and availability of raw materials, production costs and the location of main consumption markets. Commodity chains are also integrated by a transport chain routing goods, parts and raw materials from extraction and transformation sites to markets. Obviously, the nature of what is being produced and the markets where it is consumed will correspond to a unique geography of flows. Three major stages can be considered within a commodity chain:

• First Stage (Raw materials). The availability of raw materials often imposes sourcing at the international level, a process which has accelerated in recent years. It dominantly concerns the procurement of commodities. The flows occurring at this stage are mainly supported by international transportation systems relying on bulk shipping. Distribution tends to involve high volumes and low frequency. This system is also being impacted by the containerization of several commodity markets.
• Second Stage (Manufacturing and assembly). Mainly concerns intermediate goods. Some capital intensive manufacturing and assembly activities will take place inside of the national economy while labor intensive activities are out-sourced. Flows are either containerized or on pallets, with average volumes and rather high frequencies, notably for commodity chains relying on timely deliveries.
• Third Stage (Distribution). Distribution of final goods mainly takes place on the national market, although globally oriented distribution imply that a national market is serviced from a major gateway. Depending on the scale of the distribution (international, national or regional), flows can be coordinated by distribution centers having each their own market areas. Flows are actively managed, often in low volumes (less than truckload; LTL), but with a high frequency since they are related to retailing.

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