1. GE 541 September 16 - 18, 2008 (Lectures 4 & 5) Institutional and Organizational Innovations in Transport Systems

2. Parallel to the physical innovations (e.g. containers) there has been a flurry of non-physical innovations in transportation There are the institutional and organizational innovations.

3. Such nonmaterial innovations are of two types: A.Change of economic institutions governing transport. e.g. deregulations, privatization liberalization B. Change of operational processes of goods transport

4. Economic Institutions Governing Transport Recent Reform: The rise of free trade regimes - creation of IMF and the World Bank General Agreement on Tariffs & Trade (GATT) WTO NAFTA, EU, MERCOSUR

5. An Advanced Transport & Trade Facilitation System Physical Infrastructure Transport subsystems Information subsystems Nonphysical infrastructure (knowledge and competencies in transport and trade facilitation) Overall governance of transport and trade facilitation Business logistical systems Financial coordination Governance of physical flows Components of an Advanced Transport and Trade Facilitation System

6. Promotion of Cross-border Flows A. Deregulation of Transport Services - Removal of cabotage - Privatization of transport infrastructure - Reform of commercial & legal frameworks - Reinvention of the customs function

7. B.New Business Logistics Systems (Lower costs, minimum inventory, quick market feedback & expanding market reach) C.Better Financial Coordination (New payment systems, lower risk) D. Use of IT and other knowledge technologies to speed up cross border flows

8. Factors Underlying the Transformation of the Transport Enterprise

9. Cost per Ton-Mile, 1995 Dollars Railroad Operating Costs per Revenue Ton-Mile, Costs per Revenue Ton-Mile, 1980-1995, in 1995 Dollars

10. Operating Costs of Less than Truckload and Truckload Carriers, 1988-1995, in 1995 dollars per vehicle mile

11. The Passenger Cost for the Airline Industry, 1980 - 20000 (in current USD)

12. Post 1990, Transport Logistical Structure The Logistical Channel Just-in-Time (JIT) Quick Response Services Containers tracked around the world & ‘visible’ in transit Old paper system on cargo replaced by Electronic Data Interchange (EDI) and e-mail

13. Freight flow faster, cheaper and more reliable New types of Transport & Logistical Services (e.g. reliability & timeliness - strategic outsourcing of a firm’s distribution function - flexibility in destination choices - additional production value and strategic competitive advantage - operation of distribution & warehousing facilities - where to source intermediate goods

14. Management of value chains of other firms Moving into e-commerce Consumer demand oriented “pull” system

15. The Evolution of Novel Freight Service Attributes, Logistical Systems, and Economic Benefits

16. Worldwide Logistics Costs Exceed $1 Trillion, of which $610 Million is Non-Transport Logistics Service Charges

17. Real Inventory Sales Ratio for Durable Goods in Manufacturing Industry (1980-2005, quarterly data)

18. Real Inventory Sales Ratio for Motor Vehicles in Manufacturing Industry (1980-2005, quarterly data)

19. Globalization Process - Cross-national integration across the world Attributes Multidimensional-cultural, political, economic, spatial Economic - functional integration of production/consumption Spatial-coordination of demand/supply across international boundaries The Context

20. Convergent Forces Leading to the Rise of the Globalization and Dynamic Cities Economic and Spatial Evolution A. Global Transformation Global organization of production systems (economic volatility) B. Rise of Dynamic “Learning Regions” Rise of the Entrepreneurial City (Emphasis on Wealth Creation) A. The production of Urban Dynamic Competitiveness B. Innovations in Governance in Policies in Institutions C. De-emphasis of Redistributive Functions A. Global Network Corporations, Dynamic Small and Medium size (SME) Enterprises B. Public Sector Entrepreneurial Agents C. Social Sector Entrepreneurial Agents Weakening of the Earlier “Economic Regime” [Rise of customized production and quality competition & demand for variety; the weakening of the National Keynesian apparatus] Non-Material Technologies & Infrastructures (Neo-liberal Ideologies, Open Trade Regimes, Logistical, Property Rights and Financial Innovations, Entrepreneurship as a Pervasive Model) Material Technologies (Knowledge-rich Transport Communications & Production Technologies) Change Factors Change Agents Outcomes

21. Global Network Corporations (GNC) Major agents of current globalization (e.g. GE, Toyota, Microsoft, Pfizer, GM) Take advantage of: - Economies of scale in knowledge - Economies of scope in the use of corporate Networks (knowledge, financial, marketing etc.) - Variations in local labor & other input costs Create & maintain production units around the world in urban areas with high global accessibility. Global Corporations use cities and urban regions as organizational structures to maximize returns on capital.

22. Production Consequences Competitive and comparative advantages Global Sourcing – harmonization across economic systems JIT- lean and flexible production Flexible Specialization – horizontal replacing vertical integration Cost Advantages of Spatial Economies in addition to scale and scope economies Increasing Trade as % of GDP continued….

23. Objective - Reliable delivery through low-cost/high-value services World-wide coordination of production and distribution Capture upstream /downstream advantages of material-component-output linkages for cost reduction across supply chain Attribute - Technology Advances - Transportation - larger, faster - Information Systems - Logistics Innovations Transport Implications of Globalization

24. Transportation Logistics: Supply Chain Strategic and Operational Issues

25. Definition – Integrated management of overall value chain through time compression. Objectives – Efficient movement and storage of raw materials, intermediate and final goods with associated information flows through the supply chain. Effective inventory management and distribution for cost minimization. Right product, right place at right time. Logistics – Definition and Components

26. Transportation and Supply Chain Links

27. Integrated Logistics Management- Global Optimization Transport Logistics Inbound/Outbound Logistics – movement of goods through the supply chain Effective management of transportation, warehousing and distribution Pull Logistics Types of Logistics

28. Transportation Logistics: Strategic Issues in the Value Chain

29. Elements of the Integrated System of TNT

30. Trends Pre production/Post production decisions to location and production decisions Internet and e-commerce Traditional to Web logistics Reverse Logistics

31. Traditional Logistics Supply Chain

32. Rethinking the Logistics Supply Chain: Web

33. Supply Chain Characteristics of Newly Industrializing Countries Source: Modified from Waller (1995).

34. Logistics Challenges in Indonesia Note: SKU = stock keeping unit Source: Knoop, (1996)

35. Comparative Information on Selected Logistics Markets

36. Time Delay and Exports