180 M.Hesse.J.-P.Rodrigue/Journal of Transport Geography 12 (2004)171-184 100% 4.2.Complexity of the supply chain 90% 80% An integrated freight transport system requires a high 70% level of coordination.The more complex the supply 60% Administrative Costs chain,the higher the friction since it involves both 50% Transportation Costs organizational and geographical complexity(see below). 40% Inventory Carrying Costs Under such circumstances,the logistical friction takes 30% 20% the form of an exponential growth function of the 10% complexity of the supply chain (Fig.9).A core dimen- 0% sion of this geographical complexity is linked with the 1980 1985 1990 1995 2000 level of spatial fragmentation of production and con- sumption.Globalization has thus been concomitant Fig.8.Logistics costs,US,1980-2000 (in billions of $)Source:Cass and ProLogic (2002). with a complexification of the supply chain and logisti- cal integration permitted to support it.Many industrial location concepts indirectly address this perspective by investigating how firms grow in space and how pro- instance,between 1950 and 1998,the average time in duction is organized to take advantage of comparative transit for imported goods fell from 40 days to about 10 advantages(Dicken,1998).The extended range of sup- days.Each transit day adds about 0.8%to the final cost pliers and the globalization of markets have put of goods.As such,20 days at sea adds the equivalent to increasing pressures on the supply chain,a problem a 16%tariff on international trade (Hummel,2001). partially solved by using high-throughput distribution Concomitantly,the costs of logistics in the American centers. economy went from about 16%of the GDP in 1980 to The geographical scale of the supply chain is linked 10%in2000(Fig.8). with a level of logistical friction as nationally oriented However,within the components of logistics costs, supply chains tend to be less complex than multinational the transportation segment has experienced absolute as supply chains,mainly because they are less spatially well as relative growth.While it accounted for 46.5%of fragmented.From an operational perspective,it con- total logistics costs in 1980,this share climbed to 58.6% siders a balance between the benefits derived from the in 2000 (Fig.8).Inventories are thus increasingly in increased fragmentation of the supply chain with the circulation and inventory costs were reduced propor- organizational costs that come along.At some point,it tionally.The issue of mobile inventories,as opposed to becomes excessively difficult to maintain the coherence the traditional concept of fixed inventories has blurred of the supply chain.The marginal costs of this function the assessment of logistics costs.Trade-offs between have substantially been reduced by information tech- fixed costs (inventories,warehouses,etc.)and variable nologies and corporate strategies such as mergers and costs (transportation)play a major role in corporate joint ventures,implying that increasingly complex sup- strategies,since the advancement of new technologies ply chains can be supported with the resulting allows for the mobilization of inventories and.sub- improvements in productivity,efficiency and reliability. sequently,the elimination of facilities-whereas the Consequently,it is possible to maintain or improve key deregulation of transport markets attracted firms to time-dependent logistical requirements over an extended expand their shipping and transportation activities,by geography of distribution,namely the availability of significantly lowering the freight rates.Thus companies parts and products,their order cycle time,and the fre- were able to reduce a considerable amount of total quency,on-time and reliability of deliveries.The con- distribution costs. solidation of logistical activities in high-throughput Decomposition Information technologi Clearance. Transshipment Regulation erminal imp ovement Inventory management Deregulation Composition Distance Tim Complexity Market area Transport Supply Chain Transactional Fig.9.Logistical friction.instance, between 1950 and 1998, the average time in transit for imported goods fell from 40 days to about 10 days. Each transit day adds about 0.8% to the final cost of goods. As such, 20 days at sea adds the equivalent to a 16% tariff on international trade (Hummel, 2001). Concomitantly, the costs of logistics in the American economy went from about 16% of the GDP in 1980 to 10% in 2000 (Fig. 8). However, within the components of logistics costs, the transportation segment has experienced absolute as well as relative growth. While it accounted for 46.5% of total logistics costs in 1980, this share climbed to 58.6% in 2000 (Fig. 8). Inventories are thus increasingly in circulation and inventory costs were reduced propor￾tionally. The issue of mobile inventories, as opposed to the traditional concept of fixed inventories has blurred the assessment of logistics costs. Trade-offs between fixed costs (inventories, warehouses, etc.) and variable costs (transportation) play a major role in corporate strategies, since the advancement of new technologies allows for the mobilization of inventories and, sub￾sequently, the elimination of facilities––whereas the deregulation of transport markets attracted firms to expand their shipping and transportation activities, by significantly lowering the freight rates. Thus companies were able to reduce a considerable amount of total distribution costs. 4.2. Complexity of the supply chain An integrated freight transport system requires a high level of coordination. The more complex the supply chain, the higher the friction since it involves both organizational and geographical complexity (see below). Under such circumstances, the logistical friction takes the form of an exponential growth function of the complexity of the supply chain (Fig. 9). A core dimen￾sion of this geographical complexity is linked with the level of spatial fragmentation of production and con￾sumption. Globalization has thus been concomitant with a complexification of the supply chain and logisti￾cal integration permitted to support it. Many industrial location concepts indirectly address this perspective by investigating how firms grow in space and how pro￾duction is organized to take advantage of comparative advantages (Dicken, 1998). The extended range of sup￾pliers and the globalization of markets have put increasing pressures on the supply chain, a problem partially solved by using high-throughput distribution centers. The geographical scale of the supply chain is linked with a level of logistical friction as nationally oriented supply chains tend to be less complex than multinational supply chains, mainly because they are less spatially fragmented. From an operational perspective, it con￾siders a balance between the benefits derived from the increased fragmentation of the supply chain with the organizational costs that come along. At some point, it becomes excessively difficult to maintain the coherence of the supply chain. The marginal costs of this function have substantially been reduced by information tech￾nologies and corporate strategies such as mergers and joint ventures, implying that increasingly complex sup￾ply chains can be supported with the resulting improvements in productivity, efficiency and reliability. Consequently, it is possible to maintain or improve key time-dependent logistical requirements over an extended geography of distribution, namely the availability of parts and products, their order cycle time, and the fre￾quency, on-time and reliability of deliveries. The con￾solidation of logistical activities in high-throughput 228 233 291 302 377 214 274 351 445 590 18 20 26 30 39 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1980 1985 1990 1995 2000 Administrative Costs Transportation Costs Inventory Carrying Costs Fig. 8. Logistics costs, US, 1980–2000 (in billions of $). Source: Cass and ProLogic (2002). Transport Supply Chain Transactional Composition Transshipment Decomposition Friction Terminal improvements Information technologies Deregulation Clearance, Inspection, Regulation Distance / Time Complexity Market area Inventory management } { { } } } } { Fig. 9. Logistical friction. 180 M. Hesse, J.-P. Rodrigue / Journal of Transport Geography 12 (2004) 171–184