Commodity Chains and Types of Transported Freight

There is a direct relationship between the nature of commodity chains and how freight transportation systems are organized. The above figure provides hypothetical transport systems for the three stages of production.

• Raw materials. At this stage, most raw materials are going through three major processes. The first, extraction, is the process of gathering (harvesting, drilling, mining, cutting, depending on the nature of the material) raw materials. The second, transfer, is the process of collecting and storing large quantities of bulk freight, which mainly takes place at port and/or rail terminals. The third, processing, is the transformation of raw materials to components that can be used for manufacturing. Processing activities tend to be closer to markets. For this stage, transportation modes and infrastructures tend to be specialized and of high capacity (tanker ships, pipelines, mineral or cereal bulk carriers, etc.) since economies of scale is a strong driving force. Intra-industrial linkages are related to an enterprise seeking vertical integration. For instance, a steel mill (processing) could be involved in iron and coal mining, as well as owning the transportation modes supporting its activities.
• Semi-finished products. This stage is strictly involved in the manufacturing and assembly of parts and products. Depending on the complexity of the product an elaborate set of linkages and their associated flows takes place between several enterprises. Intra-industrial linkages tend to be horizontal as an enterprise seeks to control most of the stages in the manufacturing of a product or a group of products. The usage of transportation modes varies according to the products, ranging from air freight for high value goods to containerized or pallets traffic for parts. Globalization has radically modified this stage with the opportunity to use new manufacturing and assembly opportunities at low cost locations.
• Manufactured goods. This stage is concerned by the distribution of finished products to consumption markets. The first process, distribution, involves issues such as packaging, warehousing and transporting products to the market, which brings the second process, retailing. Retailing is commonly the final stage of a commodity chain where consumers (individuals and enterprises alike) have access to a product. For most retailing activities, the consumer is responsible to transport the product, once acquired, to its place of consumption but several retailers are also involved in deliveries. Most flows tend to be regional in scale, except for flows between distribution centers. Considering that a significant share of the consumption takes place in urban areas, distribution and retailing flows are increasingly an urban transportation problem. As such, trucking tends to be the dominant mode of the process of distribution. E-commerce has often helped the processes of distribution and retailing to merge in a single function.