Canada’s Asia-pacific Gateway and Corridor Initiative Workshop Canada’s Asia-pacific Gateway and Corridor Initiative Workshop “Towards a Value-Added Strategy” Transport Canada“Towards a Value-Added Strategy” Transport CanadaVancouver, British Columbia, June 13 2008Vancouver, British Columbia, June 13 2008

Hanging by a Thread?Hanging by a Thread?Transportation Challenges to the Transportation Challenges to the Efficiency of Global Value ChainsEfficiency of Global Value Chains

Jean-Paul RodrigueAssociate Professor, Dept. of Economics & Geography, Hofstra University, New York, USA

Van Horne Researcher in Transportation and Logistics, University of Calgary, Alberta, Canada

A Paradigm Shift in the Making for Global Value A Paradigm Shift in the Making for Global Value ChainsChains

2

Hanging by a Thread:Hanging by a Thread:

1) Value Chain Debasement1) Value Chain Debasement2) Intermodal Transportation: Added Value or 2) Intermodal Transportation: Added Value or

Inefficiency Costs?Inefficiency Costs?3) The Action Takes Place at the Margin3) The Action Takes Place at the Margin

4) The Third Oil Shock4) The Third Oil Shock

Halterm Terminal, HalifaxHalterm Terminal, Halifax

Commodity Chain Debasement; Where Value Comes Commodity Chain Debasement; Where Value Comes From?From?

Commodity chain

Add

ed v

alue

Low

High

Manufacturing

R&D GlobalizationGlobalization

Design

Branding Marketing

Sales / Service

ConceptConcept LogisticsLogistics

DistributionEconomies of scaleEfficiency improvementsSupply chain competition

An Understatement: Containerization and Global An Understatement: Containerization and Global Value ChainsValue Chains

ContainerContainer

ProductionProduction DistributionDistribution

TransportTransport

Modes, terminals, intermodal and transmodal operations

Flow management (time-based), warehousing unit

Synchronization of inputs and outputs (batches)

Trimodal Container Terminal, Willebroek, BelgiumTrimodal Container Terminal, Willebroek, Belgium

Infrastructures, Networks and Value: Mitigating Infrastructures, Networks and Value: Mitigating InefficienciesInefficiencies

Po

rt Term

inals

Rail T

ermin

alsD

istribu

tion

Cen

ters

Container sea terminal Offshore hub Barge terminal

On-dock and near dock Satelliteterminal

Load centerTransmodalterminal

Transloading Cross-docking Warehousing

Container Transloading: Basic Value Chain for West Container Transloading: Basic Value Chain for West Coast GatewaysCoast Gateways

Cause Outcome

Weight compliance Transferring the contents of heavy containers into loads meeting national or regional road weight limits.

Palletizing Placing loose (floor loaded) containerized cargo unto pallets. Adapting to local load units (e.g. europallet).

Demurrage Handing back containers to owner (maritime shipping or leasing company) by transferring its contents into another load unit (e.g. domestic container).

Consolidation Transferring the contents of smaller containers into larger containers (e.g. three maritime 40 foot containers into two 53 foot domestic containers). Cost savings (number of lifts).

Equipment availability Making maritime containers available for exports and domestic containers available for imports. Trade facilitation.

The Importance of the Margin…The Importance of the Margin…

CoreCore(Operations)(Operations)

Infrastructure Modal access (dock, siding, road), unloading areas

Equipment Intermodal lifting equipment, storing equipment

Storage Yard for empty and loaded containers

Management Administration, maintenance, access (gates), information systems

AncillaryAncillary(Added (Added Value)Value)

Trade facilitation Free trade zone, logistical services

Distribution centers

Transloading, cross-docking, warehousing, light manufacturing, temperature controlled facilities (cold chain)

Storage depot Container depot, bulk storage

Container services Washing, preparation, repair

Knitting Value Chains at the Margin: TerminalizationKnitting Value Chains at the Margin: Terminalization

8

SuppliersSuppliers

Gateway

Gateway

Offshore

Hub

Offshore

Hub

Cus

tom

ers

Cus

tom

ers

Extended Distribution CenterBottleneck-derived terminalizationBuffer-derived terminalization

ForelandForeland HinterlandHinterland

DC DC

Distribution centerInland containerized goods flowInland non-containerized goods flowMaritime container flow

Extended Gate

Port regionalization and the creation of a Regional Load Center Network

Inland Term

inal

Inland Term

inal

Gateway

Gateway

Deer in the Headlights; A Third Oil ShockDeer in the Headlights; A Third Oil Shock

West Texas Intermediate, Monthly Nominal Spot Oil Price (1946-2008)

0

20

40

60

80

100

120

140

Jan-

46

Jan-

49

Jan-

52

Jan-

55

Jan-

58

Jan-

61

Jan-

64

Jan-

67

Jan-

70

Jan-

73

Jan-

76

Jan-

79

Jan-

82

Jan-

85

Jan-

88

Jan-

91

Jan-

94

Jan-

97

Jan-

00

Jan-

03

Jan-

06

Gold StandardFirst Oil Shock

Second Oil Shock

Third Oil Shock

Deer in the Headlights: Potential Impacts of The Deer in the Headlights: Potential Impacts of The Third Oil Shock on Global Value ChainsThird Oil Shock on Global Value Chains

Price

Supply chain propagationSupply chain propagation

Modal shiftModal shift

Gateway / Hub selectionGateway / Hub selection

Usage levelUsage level

Service area changesService area changes

Network configurationNetwork configuration

P

Q

Price

A/B

P

Q(A/B)

A

B

Range

R(B)

12B

A

Rail

RoadRaw

Materials

DistributionCenters

RetailersManufacturing

Cost