Geography Reference
In-Depth Information
delivery speed which is only possible by employing more frequent ship-
ments of goods (McCann 1998). This accounts for the almost universal
trend towards Just-in-Time (JIT) type systems of shipments, which allow
for Total Quality Management (TQM) principles to be applied on the
basis of minimum inventory supply chains (Schonberger 1996). As we
saw in Chapter 6, over the last three decades JIT logistics and distribution
systems have spread progressively from the Japanese automotive industry
into almost all modes of global manufacturing, retailing and distribution.
Obviously, the increasing sophistication of both consumer preferences and
also the advanced logistics systems responding to them are mediated by
the advances in communications and transportation technologies.
Further empirical evidence suggesting the spatial transactions costs
involved in shipping of goods have increased over the last two decades
comes from the analysis of logistics costs as a whole, rather than simply
observations of transport costs. Logistics costs are the combined costs of
all the transportation, storage, and inventory-handling costs which are
associated with moving goods across geographical space, and these are not
only much greater than transport costs, but are also related to the costs of
both time and space (McCann 1998). Firstly, logistics activities accounted
for 16 per cent of global GDP in 2000 and 18 per cent of European GDP
(Leinbach and Capineri 2007): during the 1990s, the growth rate for
the logistics sector as a whole was of the order of 6 per cent per annum
(Leinbach and Capineri 2007). Between 1987 and 1995 there was a 60
per cent increase in outsourced dedicated third-party logistics opera-
tions (Chatterji and Tsai 2006). Secondly, relative to the value of output
(Schonberger 1996), the average inventory levels for almost all manufac-
turing and distribution sectors in the developed world have fallen dra-
matically since the 1980s. This implies, as was mentioned above, that the
average lead times of goods-shipments have fallen over recent years, with a
concomitant increase in goods-shipment frequencies. Thirdly, by carefully
disentangling the various components of transport costs Hummels (1999)
demonstrates that, for many sectors, the proportion of global output
which is accounted for by the combination of logistics and transporta-
tion activities has not fallen over recent decades. More specifically, while
the transportation cost component of bulk materials has indeed generally
decreased, in the case of manufactured goods there is evidence that this
proportion has actually increased over the recent decades, in spite of the
improvement in transportation and logistics technologies (Hummels 1999,
2001). Fourthly, and consistently with the organizational changes shown
by the regionalization of global production networks and global value
chains discussed in Chapter 6, industries which are very dependent on
JIT shipments have tended to reorganize their trade patterns in favour of
