Sorbonne-Paris IV 4 th May 2007 Lecture INTERNATIONAL

Sorbonne-Paris IV 4 th May 2007 Lecture “INTERNATIONAL LOGISTICS & TRANSPORTATION” By Dr L. Boukersi Principal Lecture in International Marketing London South Bank University

INTERNATIONAL LOGISTICS & TRANSPORTATION SECTION # 1: TRANSPORT IN CONTEXT SECTION # 2: DIMENSIONS OF TRANSPORT SECTION # 3: STRATEGIC ASPECTS OF INTERNATIONAL TRANSPORT

SECTION # 1 TRANSPORT IN CONTEXT

Marketing Mix Product Price MARKETING MIX Promotion Distribution Transport Channel Strategy Logistics Strategy Inventory Location

International supply chain Store Move Use/consume Move Make Market (Europe) Plant (China) Information flow Move Store Warehouse Transport Mine (India)

• “Logistics is the process of planning, implementing and controlling the efficient and cost-effective flow/movement and storage of raw materials, inprocess inventory, finished goods and related information from point of origin to point of consumption for the purpose of meeting customer service requirements. • Logistics management is more specifically focused on providing product: § § punctuality through physical move transport availability through storage inventory

§ Advances in transportation and telecommunications technologies have contributed to the rapid growth of international trade and helped to overcome the resistance of space and time. 1500 -1850 Average speed of sailing ship was 10 mph (16 km/h) 1850 -1930 Average speed of steam locomotive was 65 mph and steamship 36 mph (58 km/h) 1950 s Average speed of propeller aircraft 300 -400 mph (480 -640 km/h) 1960 s-to date Large jet Aircraft average speed 500 -700 mph (800 -1120 Km/h)

§ A country’s Logistics Cost reflects its Economic Development Agriculture Mining Logistics Costs / GNP Argentina Brazil Kenya Industry Services Information Poland Ukraine Belgium Canada Japan Singapore United States Economic Development

Ten Largest Global Logistics Service Providers, 1998

SECTION # 2 DIMENSIONS OF TRANSPORT

. (i) (ii) The Way (or Mode) The Vehicle The terminal a) Natural. Water (seas & rivers) . Ship/Vessel. Barge . Seaport . Aircraft . Airport b) Man-Made. Road. Rail. Pipeline c) Hybrid. Canal . Road trailer. Locomotive (iii) . Distribution Centre

(i) International Air Transport § The youngest and the most rapidly growing. § Accounts for around 1% in volume and 20 -30% in value of total world trade § Rapid growth, requires high capital investment. § Divided in 3 sectors - Express (Fed. Ex, TNT, UPS, DHL) - Special commodities (perishables, live animals, hazardous products…) - Traditional Air Cargo (moving in containers or pallets) § High speed, quick transits, reliable and low risk of damage for sensitive items § Limited capacity, very costly, subject to competition not suitable for all goods and vulnerable to climatic conditions

Frankfurt is the largest air freight transshipment site in Europe • 25 780 m² freight shipment Hall (Lufthansa Cargo Centre) • Handles 700 000 tonnes per year • 6000 shipment per day • Operated by Lufthansa

(ii) International Sea Transport § High-capital investment § Low-cost mode because of large capacity shipment § Accounts for 98% of world trade in volume and 10% in value. § Types of ships: - Liners (scheduled regular services between ports) - Tramps (operate in all parts of the world in primarily bulk cargo: coal, grain, timber, sugar, fertilizers. . . ) - Specialised Vessels ( 22 types) § Can ship large volume at low cost and offer more opportunities for consolidation. § Very slow, routes and timetables not usually flexible

Port of Rotterdam § The port & industrial area stretches over a length of 40 km and covers 10, 000 hectares § More than 500 scheduled services link Rotterdam with over 1000 ports § Around 370 million tonnes handled in 2005 § The European market is accessible from Rotterdam via all modes of transport; § Rotterdam is an excellent hub for multimodal shipping; hence its name “gateway” to Europe. § The 5 largest oil firms (Shell, BP, Esso, Kuwait Petroleum & Texaco) have refineries there).

(iii) International Rail Transport § One of the oldest modes that acted as a catalyst to economic development in industrialised countries § Experienced rapid growth in the last 20 years. § Efficient way to move goods inland § Provides fast links, safe and environmentally friendly § Dependent on available fixed routes and timetables; hence, not flexible. § Subject to mechanical breakdowns and industrial actions

(iv) International Road Transport § Requires low-capital investment as it can be provided inhouse § Experienced tremendous growth in the last 2 decades § Relatively low cost and efficient transit time § Provides door-to- door delivery § Very flexible as suitable alternative routes can be found, if need be. § Very competitive within certain distance bands § Low capacity as only small consignments can be moved. § Time consuming on long distance bands § Subject to high toll charges, restrictive regulations and traffic congestions in some countries § Accounts for almost 70% of cargo shipped within Europe.

(v) Canals and Inland Water Transport § Low-cost mode of transport but slow § Europe possesses 36, 000 km of waterways § In Europe, only 6% of freight traffic are carried out by inland whereas 12% in the US. § 40% of Netherland freight traffic is carried by inland waterways shipping § Though it can accommodate high freight capacity, this mode is not yet fully exploited in Europe. § The completion of the canal joining the Rhine and the Danube (RMD), in 1992, opened up a 3500 km cheap inland waterways route between the North Sea and the Black Sea

(vi) MULTIMODAL TRANSPORTATION q There are 10 inter-modal service combinations of which the mostly used are: - rail-truck (piggyback), - truck-water (fishback) and - sea-air (international transport). q For example Sea-Air concept refers to transferring cargo from ship’s deck to aircraft take-off (in less than 5 hours). q The purpose of multimodal combination is to reduce cost and achieve speedy delivery on long distance hauls. q Piggyback or trailer on flatcat (TOFC) offers convenience and flexibility of trucking with long-haul cost efficiency of rail. This form is the most widely used between the UK and the continental Europe; especially after the completion of the Channel Tunnel.

q The desire to achieve the dual objectives of cost reduction and speedy delivery has also spurred on the construction of multimodal hubs, with significant infrastructure investments, in some strategic locations such as Dubai, Hong Kong, Seattle, Amsterdam, Frankfurt. q For example, in Dubai, the integration of the airport and seaport has enabled a volume of more than 100, 000 tonnes to be converted annually from sea to air transport. q Amsterdam Airport Schiphol is a true gateway to Europe as most of the European cities are within 300 -mile radius and 95% of Europe can be reached by road (truck) within 24 hours. § Amsterdam Airport is a unique multimodal hub as it provides a combination of air, road, rail and water links. § The Port of Amsterdam is the 5 th largest in North Western Europe in terms of transhipment tonnage, is located within a 40 mile radius from Schiphol.

Hong Kong International Airport Multimodal Hub and Gateway to China & Far East § Airport & seaport fully integrated; hence, its position as the world’s premier hub § World’s busiest international air cargo with 3. 4 million tonnes of cargo handled through it annually. § 40 million passengers passed through it in 2005 § Its core values: Safety, security, efficiency and excellence

Lille as Regional Multimodal Hub • Road transport : over 550 kilometres of highways linked directly into the pan-European road system • France’s densest rail network, offering an efficient freight and passenger-transport alternative with 1, 512 km of rail track and 122 local freight stations • High-speed rail service: Lille is at the heart of the TGV network serving Northern Europe • Direct rail link to the UK via the Channel Tunnel • High-performance inland waterway network serving Northern Europe (680 km / 422 miles of canals). • Seven seaports in the immediate vicinity: Rotterdam, Antwerp, Felixstowe, Le Havre, Dunkirk, Calais and Boulogne sur mer • Rail and waterways links with main ports in Northern Europe; complete forwarding service combining inland transport by barge and the shipping feeder

Market Share by Freight Transport Mode, 1980 -2000 United States (tonnes-mile) Europe (tonnes-km)

SECTION # 3 STRATEGIC ASPECTS OF INTERNATIONAL TRANSPORT

Transport Decisions Yi Xi - Mode selection - Vehicle Routing Transport Decisions -Vehicle scheduling - Shipment consolidation

(i) Mode selection Efficiency (cost) Mode Selection Depends Responsiveness (Speed & Reliability) §The mode selection is determined by the fundamental trade-off between the cost of transporting a given product (efficiency) and the speed/reliability with which the product is transported (responsiveness). § Fast modes are costly but very responsive and slower modes are less costly but not responsive. § If no competitive mode is identified, the relative cost of inventory is taken into consideration as fast modes incur less inventory costs and slower modes high inventory costs

Total Logistics Costs Trade-off Costs Total Logistics Costs Transport Costs Inventory Costs Sea Road Rail speed/reliability Air

Changes in the Relative Importance of Logistical Functions in Distribution Systems Responsiveness Cost reduction

(ii) Vehicle Routing This refers to finding the best paths that a vehicle should follow (e. g. a network of roads, rail lines, shipping lanes, air navigational routes) in order to minimise time or distance (iii) Vehicle scheduling is a very complex extension of the vehicle routing, which is subject to a large number of regulatory restrictions. (iv) Shipment consolidation § With transportation, it costs less on per-weight basis to move larger quantities because of the existence of fixed costs which remain the same irrespective of shipment sizes. § Traffic managers always try to consolidate large numbers of small shipments into a small number of large shipments.

SHIPMENT CONSOLIDATION Small Shipments Large Shipments Destinations London & Glasgow Oslo & Stockholm Small number Large number

Conclusion The two major benefits of international transportation are: (i) Enhance business competitiveness Progress in transportation has contributing to the separation between markets and production sites. As a result, international transportation enabled production to exploit location advantages; hence competitiveness enhancement (iii) Better living standards Rapid international shipments at reasonable prices have place seasonal products in markets that would have not otherwise been available; hence better consumer choice at lower prices

Thank you for your kind attention