The Commercialization of Transportation

The extension of the operational scale of freight distribution insures that a production system reaches its optimal market potential, namely by a combination of strategies related to the exploitation of comparative advantages and a wider market base. Although an optimal market size can never be attained due to regulations preventing monopolies and differences in consumer preferences, the trend to ensure maximal market exposure is unmistakable. The emergence of global brands and global production networks clearly underlines this. Within freight distribution, four distinct cyclic phases of extension and functional integration can be identified:

• Introduction. Initially, a transport system is introduced to service a specific opportunity in an isolated context. The technology is often "proprietary" and incompatible with other transport systems. Since they are not interconnected, this does not represent much of an issue.
• Expansion and interconnection. As the marketability and the development potential of a transport system becomes apparent, a phase of expansion and interconnection occurs. The size of the market serviced by these transport systems consequently increases as they become adopted in new locations. At some point, independently developed transport systems connect. This connection is however often subject to a function of transshipment between two incompatible transport systems.
• Standardization and integration. This phase often involves the emergence of a fully developed distribution system servicing vast national markets. The major challenge to be addressed involves a standardization of modes and processes, further expanding the commercial potential of the concerned supply chains. Modal flows are moving more efficiently over the entire network and are able to move from one mode to the other through intermodal integration. A process of mergers and acquisitions often accompanies this phase for the purpose of rationalization and market expansion.
• Integrated demand. The most advanced stage of extension of a distribution system involves a system fully able to answer freight mobility needs under a variety of circumstances, either predicted or unpredicted demand. As this system tends to be global, it commonly operates close to market potential. In such a setting, a distribution system expresses an integrated demand where the distribution capabilities are tuned to the demand in an interdependent system.

Each of these phases tends to be sequential and related to an historical process of transport development. For instance, up to the mid 19th century, most distribution systems were isolated and developed independently from one another. Even global maritime transport was fragmented by national flags and trading systems. As regional transport systems grew in the second half of the 19th century, they gradually interconnected, but moving from one system to the other required a form of transshipment. By the early 20th century, most national transport systems were integrated, but interconnection between modes was difficult. The next challenge resided in the development of intermodal transportation, accelerated by containerization and information technologies.

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Copyright © 1998-2012, Dr. Jean-Paul Rodrigue, Dept. of Global Studies & Geography, Hofstra University, New York, USA.
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