UNIVERSITEIT VAN AMSTERDAM
Value Dynamics and
labor in transport and
logistics
An exploration of the Dutch transport
and logistics industry
L.M. Keereweer (10052208) 11/13/2017
Master thesis economic geography University of Amsterdam
November, 2017
Table of Contents
1. Introduction ... 4
2.Literature review ... 5
2.1 Infrastructure and transportation: a geopolitical perspective ... 5
2.2 Transport and logistics ... 7
2.3 Transport and logistics: a global production network perspective ... 9
2.4 The supply chain: integrating transport systems, logistics and value dynamics ... 11
2.5 Supply Chains, Transport Chains and Added Value ... 12
2.6 Upgrading strategies and capital-labor relations in transport and logistics ... 16
2.7 Research questions ... 19
3. Case description ... 19
3.1 The Netherlands: logistic gateway to Europe ... 19
4. Methodology ... 24
4.1 Research design ... 24
4.2 Methods of data collection ... 25
4.3 Data analysis ... 26
5. Value and the Spatial & Political Context ... 27
5.1 Global developments ... 27
5.2 European vs national spatial planning trajectories ... 28
5.3 Dutch ‘volume-thinking’ ... 30
5.4 Value opportunities in the region ... 31
5.5 Conclusion ... 33
6. Value and Industry dynamics ... 33
6.1 Consolidation in maritime shipping ... 33
6.3 Customization & flexibility ... 38
6.4 Cooperation ... 39
6.5 Conclusion ... 41
7. Value and the Social Dynamics of Logistic Services ... 42
7.1 Transport and logistics as a value-added service ... 43
7.2 Changing role of distribution centers ... 43
7.3 A broadening range of services ... 45
7.4 Platformization ... 46
7.5 Last mile ... 48
7.6 Conclusion ... 49
8. Value and Technology, ICT & automation ... 49
8.1 ICT & Logistics ... 49
8.2 Automation & robotics ... 51
8.3 Technologic development: synchromodality ... 53
8.4 Conclusion ... 54
9. Impacts on capital-labor relations ... 54
9.1 Getting the people ... 54
9.2 Employer flexibility vs. employee security: flexicurity ... 55
9.3 Skills and labor ... 60
9.4 Technological innovation & social innovation ... 62
9.5 Conclusion ... 64
10. Conclusion ... 65
1. Introduction
The nature of and role of globalization in producing distinct social processes, economic development and spatial change has been a field of study which has generated extensive debates in economic geography. Even the term itself remains rather vague and blurry, despite the consensus that it has fundamentally changed the way we produce, distribute and consume commodities and services. The consequence of the blurry nature of the concept is that in the study of globalization gaps exist which reflect the poor understanding its driving forces (Rodrigue, 2006). Although advances have been made, especially in terms of the concept of the Global Production Network (GPN), there are still fields of inquiry that deserve the attention of economic geographers to understand the contemporary transformative and diverse processes that occur around the globe (Coe, Dicken & Hess, 2008). Most of the field of inquiry has focused on global producers and manufacturers and the distinct economic outcomes they produce in various spatial, political, social and cultural contexts. What is less well understood is how the understudied field of transport and logistics is not only positioned
strategically in the systems of production, distribution and consumption, but also how this mature industry has evolved to produce its own dynamics with respect to the value the industry generates (Hesse & Rodrigue, 2006).
The global transport and logistics market, comprised of shipping, warehousing, courier and rail, road and air freight as well as all the logistic functions that are derived from it, stood at a global market value of 4 billion US dollars in 2010, equating to 10 percent of the global GPD (Worldbank, 2016). It’s evident that this global industry is an important driver for economic development, but in globalization studies, this industry has largely been neglected or merely been treated as a derived function of global economic processes. This presents an enormous gap. Not only is globalization in part driven by developments in global transport and logistics, but with its position of being at the interface of the global and the local it produces distinct outcomes for regions, nation state, territories and cities, all of which transform and are being transformed by the interaction of the industry with the spatial, political, social and technological conditions that are embedded within diverse spatial contexts. This thesis therefor aims to add to understanding of the mutual transformative processes between transport and logistic firms and the territories they are embedded in. A GPN perspective will be used to assess how value creation, capture and enhancement opportunities of transport and logistic firms can be placed in context of political/spatial, economic, social, technological developments, and how these developments can be situated in trends that occur on various geographical scales. Firstly, the industry is embedded for a large part in national and international infrastructural programs and policies. Infrastructure is a policy area in which state intervention is large due to its nature of being a public good. As a consequence, the development paths of infrastructure and spatial planning impacts greatly on the transport and logistics industry (van Duinen, 2013). Secondly, transport and logistics, as mature
industry in itself, has its very own value dynamics, which are interestingly not considered in current GPN studies (Coe, 2014). The role of the industry is often implicitly referred to, but how there are interesting developments within transport and logistics that relate to processes of globalization. Thirdly, the way we consume is profoundly changing the way we use transport and logistic services, and consumption is embedded in social contexts that manifest itself differently across territories. Technological innovations are changing the way we are producing and distribute goods across the globe, significantly increasing productivity and therefore production costs. On the other hand, with rising consumption levels and pressures to achieve sustainability goals, now more than ever it is important to think about how we are going to do more with less. Technological innovation therefore inform the transport and logistics to a greater extend, but it’s now well understood how this impacts on the organization and the value dynamic within the industry (Coe, 2014; Hesse & Rodrique, 2006). Relating to the societal impacts of the developments within the industry, a specific field of research that is interesting to delve into how labor is affected by the specific value dynamics that are produced by the transport and logistic sector. The physical flow of goods is still very much a labor intensive project. In the contemporary global economy, in which the flows of goods and information circulate 24 hours a day, through different time zones and to different locations, labor is also active 24 hours a day, whether it be through direct transportation or indirect coordination of these goods and
information. Understanding these labor issues in relation to the industry’s value dynamics can therefore increase knowledge on the way labor is inserted in the global transport and logistic production network and how this might affect capital-labor relations.
Using the Dutch transport and logistics industry as a case, this thesis presents an exploratory study to expand the knowledge on the internal and external factors that inform value dynamics within the industry, as well as researching the distinct outcome of these dynamics in terms of labor issues.
2.Literature review
2.1 Infrastructure and transportation: a geopolitical perspective
China’s One Belt, One Road initiative to develop a vast array of cross-border transport corridors, linking sixty countries, affecting approximately four billion people and costing up to one trillion US dollars (Ferdinand, 2016), is an ambitious foreign policy campaign often compared to the US-led Marshall plans to revive Europe in the post WWII era (Zeng, 2017). By promoting cross-border flows of goods through the establishment of transport corridors, distant and backward places, namely in Asia, are connected to global transport and logistic hubs like Rotterdam, Hamburg, Singapore and Shanghai. Although the project is presented as promoting international interconnectivity and as a development strategy, it is often associated with geopolitical efforts to restore China’s traditional position in world
affairs (Ferdinand, 2016). The One Belt, One Road is an example of how cross-border economic cooperation can be articulated through the development of transport corridors. This is nothing new in the European context, which has seen efforts to increase EU territorial cohesiveness by the
establishment of the spatial planning concepts of ‘Eurocorridors’ and the Trans-European Transport Networks (European Commission, 1999). Corridor development as such can be seen as an instrument to promote economic development through the establishment of transport links, based on the
assumption that development will be the result of positive externalities that are accompanied with investment in infrastructure. Although this assumption, based on David Ricardo’s neoclassical theory of comparative advantage, is seen as a flawed neoclassical approach to explain economic activity across space (Witte et al., 2013), a more positive interpretation is that corridors, and the transport links that define them, present opportunities for development in places development would otherwise not take place (De Vries & Priemus, 2003). Despite ambiguity in literature about the effectiveness of infrastructure investment through corridor development, there is no doubt that socioeconomic changes like globalization, the rise of the network society and post-Fordism, has led to a redefinition of the role of transportation in the global economy. Marc Levinson (2006) provides an excellent example of how innovations in international intermodal transportation (Levinson used the container and the
transportation systems that underpin it) has the power to change the world economy and the position of regions within that world economy. Additionally, in New Economic Geography approaches, transportation systems and infrastructure are seen as part of a package of assets that make regions competitive in the world economy, leading to a renewed attention to transport in economic activity (Docherty, 2004). It is therefore no surprise that transport and infrastructure are policy areas that generate considerable state intervention, especially in an era that is marked by global competition between regions. Corridor development, in which flows of goods can be managed more effectively and efficiently (Rodrigue, Comtois & Slack, 2006) can thus be placed within a wider context of socioeconomic changes that are part of the structure and composition of contemporary capitalism. A different view on corridor development relates to corridors not just as instruments of regional economic development, but that transnational flows of commodities and information necessitates a redefinition of borders and territoriality to control these flows. In contemporary neoliberal capitalism, not a single nation state has absolute control over transnational flows of goods and information (although some states have more geopolitical prowess to exert control than others). The
internationalization of trade and logistics has required a new conception of borders and territoriality, one in which the nationstate is positioned in a larger constellation linking subnational, national, regional, international and global actors together in new spatial concepts: whether they be called corridors, trading blocs, supply chains or transnational organizations like the EU, the goal is
multilateral, multiscalar and multi-actor coordination. Corridors are therefore not only an instrument to control and coordinate international flows, they are also spatial manifestations of contemporary
neoliberal capitalism that is defined by these flows. The redefinition and expansion of borders and territoriality through corridor development invites processes that occur on a global scale into national affairs, thereby transforming domestic industries and reshaping national citizenship and labor rights (Kanngieser, 2013). An important question for those who are studying transnational spatial concepts is how national and subnational interests are secured in transnational bodies that aim to coordinate global economic processes.
2.2 Transport and logistics
Transport and logistics represent an industry that both shapes and is shaped by transnational flows of goods and information. In such a way, the industry has always been highly internationally oriented. Despite this orientation, firms active within the industry are embedded within national and subnational contexts. A clear example of this is that transport and logistic firms are highly dependent on physical infrastructure that is predominantly provided by the nation state. As such, an enabling role of national governments in providing physical links to transnational spaces of circulation is essential for the success of firms within this industry. Another example is that transnational flows, however footloose and unresponsive to individual control, are in fact grounded somewhere, in ports, terminals, in
distribution centers, on roads, rails and waters, all the way to the shelves in stores and shops where the consumer may choose to buy the goods or not. Transport and logistics therefor binds the individual consumer to the international actors that have done their part in the production of the goods, and therefor brings the global into the subnational context.
Transport and logistics is of course nothing new. Historically, logistics is a military term that was used to describe the system of constant supply of armies in the field, and was thereafter borrowed
commercially to continuously supply products to consumers (Bonacich & Wilson, 2008). The
commercialization of transport and logistics is underpinned by a silent revolution since the 1970s: the logistic revolution. The logistic revolution, defined by the transformation of the transportation and distribution on a global scale (Sowers, 2016), is linked with the rise of globalization that occurred in the same period. Before the logistic revolution came into full force, the geographical scope of
transportation and distribution was largely domestic. Both technical and institutional barriers inhibited mass transportation. The post WWII shipping industry, for example, was severely constrained to expand globally, simply because transportation costs were too high with the shipping methods at the time, which relied mostly on extensive use of labor. With the rise of container shipping, and the increasing automation and standardization that accompanied it, transportation costs dropped so
dramatically that movement of goods to distant parts of the world not only became possible, but highly profitable. (Levinson, 2006). A related development, which was underpinned by the standardization containers allowed, was international intermodalism in transportation, in which international accepted standards about the size of containers enabled the development of global streamlined transportation systems that included shipping, truck-driving and railroads. The political context in which
containerization and international intermodalism were embedded gave another spur by which the logistic revolution could come into its own. Attacks on the welfare state, deregulation and increased international free trade, which were part of the neoliberal model articulated through the Washington Consensus (Bonacich & Wilson, 2008), shaped the conditions through which goods could be shipped more cheaply, efficiently and less regulated by state interference; not only domestically, but because international adoption of the free-market ideology also globally.
The structure and composition of contemporary capitalism therefore seems to be defined for a large part by the revolution in logistics. It not only brought new markets for consumption within the reach of producers, but it also made geographical diffusion of production possible (Sower, 2016). In the period before the logistics revolution, producers had to be close to end markets, because of high
transportation costs. These were mostly cities, where the land rents were high. The drop in these costs made it possible for producers to move to locations with lower land rents and to places where the most important production factor, labor, was cheap, resulting in a global division of labor. Logistics, and especially after the logistic revolution, has thus “…been crucial in the process of time-space
compression that has remade geographies of capitalist production and distribution at a global scale.” (Cowen, 2014, p.10). This geographical diffusion of production made possible the rise of the global supply chain, which scours the globe for the cheapest production inputs and large end markets. Wal-Mart is an example of a firm encompassing an entire supply chain, whose business revolves around the movement and distribution of goods and whose enormous retail power is largely determined by logistics (Sowers, 2016). Linking emerging and competitive places supplying cheap goods and labor together with the major consumer market in North America, the value that Wal-Mart generates is mostly derived from its ability to extremely efficiently organize and manage its value chain and networks, with logistics being an integral part of those activities (Hesse & Rodrigue, 2006).
Despite the importance of the field in shaping the structures of contemporary capitalism, transport and logistics has been given relatively little attention outside the corporate and business management field. Corporate and business literature regard transport and logistics as the management of flows of goods and information from point of origin to destination, and is primarily concerned with the ways this is to be coordinated efficiently, effectively and cheaply. Transportation of these goods, a service provided by transport and logistic firms, is seen as an area where cost reduction can be made, while
transportation costs in general are seen as necessary evil that no producer of whatever commodity can get around. Outside the business and corporate literature and in the field of economic geography, transport and distribution, and the logistic services that manages them, is often regarded as a derived demand, or as simply an output of the processes that occur within the supply chain. As Hesse & Rodrique (2006) note: “…if transportation is a subservient function of other processes and exists as an outcome of the physical flows they generate, why should economic geographers show interests about an activity that can easily be explained (derived) by others.” (Hesse & Rodrique, 2006, p.503). These
perspectives give little attention to the links with the widely studied process of globalization, which is at the center of economic geography. Economic geography, according to Hesse & Rodrique, 2006, is either completely ignoring or only implicitly referencing to transport and logistics in studying the transformative process and implications of globalization, by which it is actually aiming to explain a phenomenon without understanding an important driving force of the phenomenon itself. Additionally, transportation and the movement of goods has become a dynamic industry in itself, generating value for firms, cities, regions and states in ways that are functionally and geographically diverse. Therefore, instead of viewing transport and logistics as a merely derived demand, disconnected from the process and outcomes of globalization, the industry should be placed more prominently in debates on how processes of globalization affects the value-added activities of firms and regions within the contemporary global economic system.
2.3 Transport and logistics: a global production network perspective
To understand the role of transport and logistics in the contemporary global economy, it is imperative to understand the way in which the global economy is organized. A growing field of research on this organization within economic geography is conceptualized through the Global Production Network (GPN). Coe, Dicken & Hess (2008), who have written extensively about the concept, defines the GPN as “…the nexus of interconnected functions, operations and transactions through which a specific product or service is produced, distributed and consumed. A global production network is one whose interconnected nodes and links extend spatially across national boundaries and, in so doing, integrates parts of disparate national and subnational territories.” (Coe, Dicken & Hess, 2008, p. 274). There are a number of dimensions informing the conceptualization of the global production network. The first is central focus on a multiplicity of actors, both economic and non-economic. The second is that these actors operate on different geographical scales, from local to global. Thirdly, these actors are
influenced by the socio-spatial context in which they are embedded, informed by both their position in the network (network embeddedness) and their specific territorial location (territorial embeddedness). Fourth, the relationship between the actors and their power (im)balances informs the way the GPN is organized and reveal the of governance arrangements that is driving the network. Fifth, the economic interaction between actors produce different points in the network where value is created, where (and by whom) it is captured, and how value might be enhanced. Sixth, how, where and for whom value is created, captured and enhanced, produces differential outcomes for the locations that are inserted in the global production network (Dicken, 2011).
The GPN offers a heuristic framework to understand processes that are occurring within the global economy and how these processes are the outcomes of interactions between actors that are
GPN framework places actors and locations prominently in the globalization studies, implying that processes of globalization are not just happening outside the grasp of actors, but is actually shaped, articulated and reinforced by them, as well as uncovering the mechanisms through which globalization has different implications for different locations.
There are extensive benefits to be gained in using a GPN framework to study the underestimated role of transport and logistics within the contemporary global economy. First, the logistics sector has grown so extensively that they can be classified as a GPN in its own right, with its own value dynamics and its own inter-, intra- and extra-firm networks and relations. Secondly, the growing sophistication of the sector reveals the important role they play in the value creation, enhancement and capture opportunities for other industries. The strategic importance they remit to their client industries consequently affect the value dynamics for a myriad of actors, firms and locations across a wide range of sectors (Coe, 2014). Besides the benefits of using a GPN framework to study transport and logistics, there are a number of reasons that provide an obvious rationale to employ such a framework for this particular sector:
1) Transport and logistic activities are inherently multi-actor. Be it firms, states, producers and consumers, all are affected by and benefit from the continuous circulation of goods and information.
2) Because the circulation of goods and information crosses all geographical scales, the sector is innately multi-scalar in orientation.
3) The sector is in a variety of ways embedded, both territorially in the physical infrastructures and institutional arrangements that enable/restrain circulation of good and information, and within the networks of the various production systems it services.
4) With the sector having an intermediate role in and strategic purpose for other production systems, it is intricately involved in the governance arrangements and ways of organization in all systems of production.
5) Transport and logistic services are not isolated from other parts of both the global economy and the distinct national and subnational circumstances they are embedded in. The sector has various impacts on the location decision of firms and provides spillover effects for other industries. On the other hand, it is affected by spatial planning policies, safety standards, environmental regulations and labor regimes that are determined by actors from different geographical scales. Therefore, the activities in this sector not only influence the value
creation, capture and enhancement of other industries, but they also produce distinct outcomes for the territories they are embedded in because of the close links to different policy areas.
2.4 The supply chain: integrating transport systems, logistics and value dynamics
Although the GPN framework provides great analytical potential to understand the role of transport and logistic systems in the global economy, its role is primarily being conceptualized through the supply chain. According to Rodrique, Comtois & Slack (2008), the supply chain can be imagined as a series of successive stages, “…from the transformation of raw materials, through intermediatemanufacturing stages, to the delivery of a finished good to a market…” (Rodrique, Comtois & Slack 2008, p.169), in which firms perform different activities sequentially for the purpose of adding value to the chain. In each stage, different transportation activities are performed, resulting in differences in value added at each stage. To organize the transportation these goods in sequential stages brings us into the realm of logistics, which is concerned with the planning, implementing and coordinating of the transportations of goods in sequences. Transportation activities are therefore part of a wider logistic system that manages the supply chain. As such, logistics incorporates the physical transportation of goods, managed by the overarching management of the supply chain.
The supply chain concept focusses largely on a sequence of activities which have their own value-added dynamics, and approaches these dynamics for a large part with a firm-centered view. It appears quite natural to use the chain metaphor to explain the activities in transportation and logistics, because getting goods from A to B suggest a natural sequence of actions. Developments within the supply chain therefore appear essentially linear. The firms incorporated in these chain sequence perform their own role, and how value is created, captured and enhanced depends on the position the firms have vis-à-vis other firms. Relationships are therefore central in the chain metaphor (Mahutga, 2014), and innovation in the business process is dependent on internal firm capabilities to compete with other firms (Gerrefi, Humphrey & Sturgeon, 2005). But critics of the supply chain concept highlight that the chain metaphor does not do enough justice to how the relationships between actors are shaped by external forces, reducing these relationships to being static and given and suggesting that
transformations within the industry are trapped in silos from other dimensions of the global economy. The realities are that relationships among actors are uneven, that actors are informed by the firms, networks and places there are embedded in, that non-firm actors shape the system as well, and
transformations that are taking place are mutual transformations, both for the industry and firms on the one hand, and the territories they are embedded in. In other words, the supply chain metaphor reveals a lack of understanding of how social relations relate directly to industry innovations (Selwyn, 2012) and consequently that value dynamics are shaped by interfirm, intrafirm and extra-firm relations. This suggests a different way of getting goods from A to B: in a sequence that reveal non-linear
developments, which go beyond the firm-centrism offered by the supply chain concept.
2.5 Supply Chains, Transport Chains and Added Value
GPN research has made important advances in understanding the organization of and value dynamic within transport and logistics that go beyond the conceptions in the chain metaphor. As such, four contributions are identified that are important in understanding developments within the global transport and logistic industry.
2.5.1 Outsourcing
Globalization, increasing competition between firms and pressures to cut cost, and the development of ICT solutions has pushed firms into focusing on their core competencies and outsource certain of their logistic functions to third parties (Kumar, 2007). Firms may now determine to which extend they want their logistical activities to be outsourced to logistics service providers, from total internal asset management, in which all logistic functions are kept entirely in-house, to total external asset
management, in which all logistic functions are outsourced to providers. Although these two present the extremes in asset management, in reality there is much variation in within the scope of these extremes. The benefits of outsourcing are extensive, and the drivers for firms to outsource vary depending on their corporate strategy. Some may want to reduce costs and capital investment, others may want to reduce risk in labor management, whereas yet another reason for outsourcing might be that logistic service providers possess specialized or tacit knowledge of local markets that leads them to provide a better service (Razzaque & Sheng, 2008). Although large regional varieties exist, the global tendency reveals increased outsourcing of logistic functions. In 2013, the global market for logistic service providers stood at a scale of 703.8 billion USD, with the Pacific Asia market showing the largest revenue and the highest growth number (Capgemini, 2015).
The tendency of increased outsourcing has been driving the growth of an independent logistics industry (Coe, 2014), disrupting the chain sequence in the supply chain concept. Outsourcing has led to the opening of the industry to firms outside the conventional range of transport and logistics, some developing out of traditional transportation fields, and others from fields that lie outside the traditional boundaries (i.e. IT, finance, marketing, accounting, insurance etc.) (Coe et al, 2008b). It’s also
broadened the range of functions beyond supplying, manufacturing and assembly, and distribution. In these broadening of boundaries and range of functions, new configurations of actors have produced different value dynamics than the supply chain metaphor has conceptualized.
2.5.2 Typology of service providers.
Secondly, GPN research has made important advances in categorizing and characterizing the different logistic processes, actors and services that are existing within the transport and logistics industry today. Table 1 provides such a characterization.
Table 1: a typology of actors in the transport and logistics industry
Services Actors Logistic processes
1 party logistic provider (1PL) Manufacturing, retailing Cargo owners: manufacturers, retailers, importers/exporters, wholesaler, (governmental) institutions
Transportation and distribution are internal process performed by the firm and between cargo sender to cargo receiver
2 party logistic provider (2PL)
Transportation Carriers (shipping lines, airlines, truck companies)
Cargo owners/receivers contracts a service provider to handle a range of logistic functions
3 party logistic provider (3PL)
Logistics Logistic service providers Performs a range of logistic functions on behalf of both cargo owners and carriers 4 party logistic
provider (4PL)
Supply chain management
Lead logistic provider Plans and manages the logistic functions of cargo owners, carriers and logistic service providers, serving as mediators in the logistic process
While many firms keep their logistic operations completely in-house (1PL), other firms tend to contract other carriers for these activities (2PL), for transportation but also for functions like storage and warehousing. In other cases, independent logistic service providers (3PL) perform some of the activities of a 2PL and provide other value adding activities that are considered non-asset based, like supply chain management, customer satisfaction services, inventory management and the like, for different parts of the supply chain. These 3PLs encompasses a sector that has grown tremendously in recent years and which nowadays is referred to in both business and academic sources as ‘the logistics industry’ (Coe, 2014). A fourth group of logistic providers (4PL) relate not to the actual transportation of goods, but entirely to the non-asset based activities to organize and coordinate logistic processes in the entire supply chain. This group is mostly associated with improving the performance of an entire chain by provide knowledge- and research-based strategies (Visser & Lambooy, 2004).
The distinction between 1PL, 2PL, 3PL & 4PL reveals important dimensions for the way transport and logistics is organized and the way value is created, captured and enhanced. Firstly, the plethora of actors that perform sometimes overlapping functions has made the supply chain infinitely more complex, resulting greater mutual interdependence between actors. Secondly, the explosion of different functions that are outsourced has resulted in specialized logistic service providers who make some logistic functions their core competencies, resulting competitive advantages that shape value dynamics in all parts of the industry in distinct ways. Thirdly, the wide array of actors are all in different ways incorporated in their own network of suppliers, clients, competitors and partners, and respond under different circumstances according to the market their cater to, the geographical scope
they operate on and the synergies they have with other industries in their area. Consequently, logistic service providers don’t operate in isolation, and are not contained to the stages the chain metaphor suggests. They are organized in networks of actors that are mutually interdependent and that co-evolve through competition and cooperation, creating distinct outcomes for the regions they are embedded in.
2.5.3 Push-production to pull production
The third contribution relates to the changing nature of production systems that present different requirements of the transport and logistics industry, which is shaped by the movement from inventory-based push production to replenish-inventory-based pull production (Bonacich & Wilson, 2008; Coe, 2014). In previous production systems, economies of scale were the best way to achieve cost reduction. After all, producing more volumes reduced the fixed costs per unit, lowering the average costs of all units produced (Chandler, 2009). Long production runs were therefor employed to gain economies of scale, but more than often supply wasn’t aligned with demand, resulting in idle warehousing, delays at all stages of the supply chain in responding to demand and over-accumulation of commodities. Inventory-based systems of production were therefore rigid and inflexible, driven by supply and less by demand. The requirement for firms servicing in transport and logistics were matching this supply-driven system, until the introduction of economies of scope and the related Just-In-Time (JIT) production processes. Economies of scope relate to the reduction of costs through the production of two or more different but complementary goods in the same production process (Chandler, 2009). JIT-production systems have greatly reduced the unnecessary costs of large inventories, while keeping production costs low, as well as responding more effectively to demand. Running in parallel with JIT-production systems is the transportation and distribution goods. Firms active in transporting, storing and managing flows of goods have become much more agile and flexible in balancing the existing supply with consumer demands. Transport and logistics have become not only about the physical transportation of goods from A to B, but about which goods need to go where and at what time to respond best to demand. The physical flows that are part of the transport and logistics system are combined with information flows that are collected at the point of sale of any given product, measuring consumer demand,
measuring which stocks can be replenished at which time, and thereby avoiding large inventories. This shift towards demand-based pull production has therefore led to different requirements for the
transport and logistics industry. The need for speed, flexibility and reliability have become much more important in production lines that have become increasingly shorter (Bonacich & Wilson, 2008). That changes the position of the actors from the industry. Transport and logistics has become an industry that is not merely in service of lead manufacturing actors, but in some production systems the latter has become in service of the former. There are powerful actors, which business model rests entirely to getting goods from point of production to point of destination, who have shaped entire production processes through transport and logistics. Wal-Mart is an iconic example of such a firm, which
commands the industry so well that it has become one of the most powerful actors in the global economy today (Sowers, 2016). Manufacturers supplying goods are therefore not the only driving actors of production systems. The rise of large retailers whose core competencies lie in transport and logistics are another force that shapes the global economy on the demand side. This poses another challenge for the supply chain metaphor, apart from the chain conceptualization: demand, and the firms that represent the demand side, have become increasingly important in influencing contemporary production systems.
2.5.4 Technology and innovation
The fourth contribution in which GPN research has made advances is found in the extensive literature on innovation and technological developments that drives change within transport and logistics. Firstly, through the developments that have been made in transportation modes, which is for a large part dominated by containerization. Secondly, by facilitating transportation terminals operating at
extremely high turnover and which function as strategic nodes in the international movement of goods. Thirdly, the growing sophistication of distribution centers through the method of cross-docking, by which incoming goods are directly transformed into outgoing goods, without being inventoried, has profoundly shaped the way goods are being distributed. Fourthly, by developing intricate IT-systems for communication and data interchanging, cross-border traffic is greatly eased, making transport and logistics more efficient and intelligent. Fifth, with the introduction of the electronic marketplace, business-to-business and well as business-to-consumer relationships have been profoundly changed (Coe, 2014). Especially e-commerce, underpinned by the internet, electronic data exchange, email and the World Wide Web medium, has had great implications for the ways transport and logistics is organized (Dicken, 2011). The path to purchase is no longer linear, in a sense that consumers have more purchasing opportunities than provided by traditional retail, in which the consumer is situated at the end of the chain. Internet and electronic data exchange have also made it possible to track and trace goods and orders, greatly enhancing transparency in the supply chain. Additionally, despite the
expectation that e-commerce would replace traditional players from the field, like retailers and other intermediaries acting as bridges between firms and consumers, the electronic market place has actually added new forms of logistic service provisions, ones which focus on flows of goods derived from virtual demand (Coe, 2014). It is apparent then that innovation and technological advances have shaped the need for speed, flexibility and reliability in transport and logistics. In order for firms to meet these requirements in a volatile market, innovation is necessary to stay ahead of their competitors and create, enhance and capture value.
In sum, the supply chain conceptualizations lack understanding of the current processes in transport and logistics. Outsourcing, the expanding range of transport and logistic services and actors, the changing nature of production systems and its impact on supply and demand, and innovation and technological advances make it increasingly difficult to apply some sort of natural sequential order in
the process of getting goods from A to B. The GPN framework has been making important advances in this respect, but there are many areas of research that still need to be tackled in order to create a fuller understanding of processes in transport and logistics and the role of the industry in the global economy.
2.6 Upgrading strategies and capital-labor relations in transport and logistics
There are a number of glaring gaps in the existing literature, two of which this research will focus on. The first is related to the process of economic upgrading within transport and logistics. In existing GPN literature, the concept of economic upgrading relates to product- (production of higher-valued goods), process- (the improvement of the process of production), functional- (a move to higher-valued functions) and chain- (a move to other chains that generate more value) upgrading (Tuijl et al, 2012). It is evident that this categorization of upgrading mechanisms can’t be transferred fully to the transport and logistics industry, because the categorization has been arisen primarily through manufacturing analysis (Coe, 2014). Product and chain upgrading, for example, do not translate itself to analyze the sort of upgrading mechanisms one can find within the transport and logistics industry. Upgrading within transport and logistics therefore seem to be achieved through a combination of process and functional upgrading, resulting in entirely different corporate strategies to achieve upgrading than those that are found in other industries. One of these strategies may be through enhancing the quality of transportation. Another may by to expand to other transportation activities, often accompanied by the use of other forms of transportation and an expansion of the geographic scope of their activities. Another may be to increase their non-asset based services by entering supply chain management. And yet another strategy may be to offer services that go beyond traditional transport, logistics and supply chain services, like light manufacturing, packing and packaging and finishing simple production processes. These different strategies for value upgrading have evolved into different development paths for logistics service providers, which have grown their core business around traditional transportation and asset-based logistics providing physical skills, around knowledge-based and network-based logistics providing management skills, or combinations of those skills (Dicken, 2011). Given that logistic service providers have different skills by which they compete with or complement other firms active in the industry, the industry of transport and logistics can be imagined as networked configurations of profit-seeking, strategic actors that are differentiated across the various geographical scales on which they operate (Coe, 2014). The firms that have the best position in this network are clearly not merely the ones who are getting goods from A to B. Thus, transport and logistics has evolved to include different requirement and is presently about who can speedily, flexibly and reliably add to the physical and virtual flows of goods that cross geographical, socio-political and cultural boundaries, and who can capture the value that is created within the networked configurations oflogistic service providers that underpin these flows. And specifically, how extra-firm relations and forces external to the industry shape the corporate strategies of value upgrading. Currently, there is very little understanding about these inter-, intra and extra-firm relations in transport and logistics. Another field of inquiry related to especially extra-firm relations is the contradictory role transport and logistics fulfill in the global economy: although essentially servicing the international flows of goods, the industry is as localized an embedded as industries can get (Aoyama et al, 2006). This is especially because the industry makes extensive use of the most localized and embedded of all the production inputs: labor. Although earlier is established that research on processes of economic upgrading is lacking in transport and logistics, research on processes of social upgrading, particularly in labor terms, is even thinner.
In GPN-research, the role of labor in the global systems of production has been theorized of as being at odds with capital, and a conceptualization of their relationship in global production networks is provided by Cumbers et al. (2008):
“From the perspective of capital, the labour problem sooner or later reasserts itself into the logic of accumulation. That problem . . . is threefold: first, the need to successfully incorporate labour into the production process; second, the need to exercise control over labour time in the production process and third . . . the imperative to exploit labour as part of the process of commodification to realize surplus value. In other words, capital comes up against the reality of labour agency and resistance.” (Cumbers et al, 2008, p.370).
Thus, there is a problematic relationship between firm-level competitiveness and workers’ conditions. The continuous drive to innovate in order to realize competitive advantages may very well be
translated into deteriorating labor conditions. On the other hand, workers’ conditions are determined by the balance of power between capital and labor and how this is institutionalized by states (Selwyn, 2013). This means that there can be large geographical, as well as functional, variance in workers’ conditions and in the way labor is incorporated into different stages of the global production networks. Building upon the problematic relationship between capital and labor, Bonacich and Wilson (2008) argue that trends within the logistics industry show deteriorating conditions that are commonly shared everywhere: increased contingency, racialization, weakened unions and weakened labor standards. Because JIT and demand-based pull production have grown to become the international standard, and outsourcing has led to increased pressures on logistic service provider to remain competitive, work in all spheres, but especially the lower-end jobs of logistics, has become increasingly contingent, with logistic providers pushing workers into part-time, temporary, piece-rate, independent contracts or the like. This is accompanied by the staffing of immigrants, and often undocumented immigrants. Immigrants are more likely to be disempowered on the labor market, lacking citizen’s rights or basic knowledge of those rights. With little means to contest their working conditions, immigrants are a
group that are increasingly being incorporated into the low-end segment of logistics. Increased contingency and increased racialization divides the workers employed in the industry, which makes them difficult to organize on a structural and permanent base. Unions, which are the key actors to lever better working conditions, see their member base disappearing, resulting in a hollowing out of unions’ power. With unions being unable to organize workers under the current conditions of the industry, labor standards are lowered, with longer hours, fewer benefits and less certainty of work in many of the job segments of the logistics industry.
On the other hand, the corporate social responsibility (CSR) is on the increase, and especially in EU context, the inclusion of responsible labor practices has become mandatory in corporate strategies (Kinderman, 2013). Under the umbrella of CSR, many global logistic service providers have constructed a code of conduct that comply with the schemes of the International Labor Organization (ILO) and the United Nations Global Compact (Coe & Hess, 2013), endorsing responsibilities for a number of social issues including working conditions. However, Ciliberti et al.’s (2008) account of CSR in Italian logistics has concluded that economic and environmental concerns often supersede social concerns, and working conditions were often only considered in supplier companies, rather than in-house (Ciliberti et al, 2008; Coe & Hess, 2013). Locke et al. (2009), however, argues that CSR and other compliance-based models to improve labor conditions have not only proved to be ineffective, but that in a number of cases, firms have presented themselves as committed to improve labor conditions and have actively endorsed this commitment in their business strategy. Through joint problem solving and information sharing, and through social programs to increase trust and reciprocity, learning, diffusion of knowledge, innovative capacity building was greatly enhanced, which actually improved the competitive position of firms (Locke et al, 2009). How labor is being used and invested in, instead of misused and being exploited, to gain competitive advantage for firms is often not considered in compliance-based models like CSR. That firms in transport and logistics might shape their business strategy to invest in labor and regard them as stakeholders is a point that must be considered in an industry where innovation is a main driver of competitive advantage.
Another concern that is overlooked in the existing literature is the incredibly size of the workforce active in transport and logistics and its internal differentiation. In the EU, an estimated number of 11.2 million people work in transport and logistics, which is roughly 5% of the total active European workforce (European Commission, 2011). This workforce is highly differentiated along functional lines, and offers labor to not only maritime workers, dock workers, truck drivers and warehouse and distribution center workers, but also to software specialists, data analysists, supply chain managers, engineers and the like. It is the first group of laborers on which the existing research base has been generally focusing on: low-skilled, low-paid work that is often associated with long working hours, regarded as predominantly masculine and imagined as having a negative impact on work-life balance. Robust data on labor conditions on the high-skilled, high-paid group of workers is severely lacking,
and it can be expected that labor conditions are very different in this group (Coe & Hess, 2013). Additionally, the existing research base has primarily been focusing on the impacts of developments in global transport and logistics on labor conditions, imagining workers as passive actors who are caught in whirlwind of globalization processes that hollows out their position. How workers can be involved and how they can be used as assets has been studied less well in GPN research.
The gaps in the literature on transport and logistics in a GPN perspective are largely the way in which value is created, enhanced and captured, and the way these value dynamics impact on the position of labor within the industry. This research will focus on these gaps, aiming to answer these questions using the case of the Dutch transport and logistics industry.
2.7 Research questions
The research questions will be as followed:
How can the value dynamics of Dutch transport and logistics industry be placed within the specific political, economic social and technological context and how does there value dynamics impact on capital-labor relations?
To specify the number of dimensions which inform the context in which the Dutch transport and logistics industry operate, four sub-questions have been formulated.
How do value dynamics of the Dutch transport and logistics industry relate to the specific
political/spatial context in with respect to infrastructural developments?
How do industry-specific dynamics impact on the opportunities for firms to generate value?
How can value dynamics be placed within the social context that informs consumption?
How does technological innovation influence the value dynamic of the industry? In studying the labor issues, the following sub-question is formulated.
How do these value dynamics impact on the position of labor and affect capital-labor
relations in the Dutch transport and logistics industry?
3. Case description
3.1 The Netherlands: logistic gateway to Europe
With Europe being an attractive market for foreign exporters and investors, the Netherlands is
considered the gateway to Europe (NDL, 2011). The gateway function is established by its geographic location, strategically positioned among the largest consumer markets in Europe, the density and quality of infrastructure, which was ranked 3rd in the world by the World Economic Forum (World
Economic Forum, 2016). It’s also determined by the presence of three important logistic hubs: the Port of Rotterdam, Port of Amsterdam and Schiphol Airport. While the Port of Rotterdam is the largest European port and the 11th largest global port in terms of volume, Amsterdam, although smaller, is still the 4th largest European port. Schiphol airport is the 5th largest airport in terms of passenger traffic, but more importantly for logistics, it is the 3rd largest in air cargo (CBRE, 2011). Around these main hubs, vast concentrations of distribution centers, warehouses and other logistic facilities have been clustered. The development of these mainports was actively stimulated by spatial and economic policy in the 80s, in a period of economic recession. It marks the beginning of a paradigmatic shift in Dutch spatial planning, from protecting vulnerable locations to actively promoting strong functions and regions (Raad voor de Leefomgeving en Infrastructuur, 2016), policies of which especially Schiphol and the Port of Rotterdam have benefitted from. Large infrastructural investments were primarily rationalized under the umbrella of this mainport policy, and are additionally supported by EU funding to promote corridor development under the TEN-T projects. The Randstad, the metropolitan area that is generally considered as being the engine of Dutch economy and in which the three Dutch mainports are positioned, is consequently at the intersection of two European transport corridors and is therefore of Dutch and European interest. The network of infrastructure, the countries geographical position, accompanied by a multilingual population and a favorable business environment with low corporate taxes (CBRE, 2011) and efficient custom authorities (Agentschap NL, 2013) make it an attractive location for companies specialized in logistics, distribution and other industry-related activities. Therefore, the Dutch logistic sector is valued as one of the best in the world. In 2016, the World Bank scored the Netherlands fourth in their logistic performance index, after Germany, Luxemburg and Sweden (World Bank, 2016).
The size of the transportation sector can be divided into different modalities: road, rail, inland water, sea and air. Figure 1 gives an impression about the size of the different modalities in 2015 in
Figure 1: size of transportation sector per modality in 2015, data computed from Topsector Logistiek, 2016
It must be noted that these percentages are based on volume. In terms of volume, air transportation and railroad transportation are insignificant in terms of volumes compared to other modalities. Therefor the main focus of this research is on developments in road, maritime and inland water transportation. Transportation is just one part of the entire logistic sector. The Dutch transport and logistics industry is defined in the Netherlands by the subdivisions of transportation and transshipment (by sea, inland water, air, road and rail), storage and warehousing, supply chain management, value added logistics (VAL) and services (VAS) and support activities. The entire industry is considered as one of the highest value-added sectors of the Dutch economy, adding 66.8 billion euros in direct and indirect revenues (Topsector Logistiek, 2016) as well as employing roughly 750.000 workers, 8.5% of the total national workforce (Commissie van Laarhoven, 2015). Transportation and transshipment are those activities that are concerned with the physical distribution of goods, storage and warehousing concerns all storage-, loading- and unloading- and handling activities, much of them done in distribution centers. Supply chain management includes all management and planning activities aimed at controlling and steering the flows of goods. Value added activities (VAL) and value added services (VAS) are activities adding a specific value by logistic service providers. Examples are labeling, repacking, adding software, assemblage, but also customs activities, quality controls and call center services. Finally, the supporting activities are auxiliary services like accountancy, employment mediation, insurance, marketing or IT. Table 2 shows the key figures of the Dutch logistic sector, which includes all the above-mentioned subdivisions. Transport and transshipment, storage and warehousing and supply chain management are the subdivisions of logistics that are considered direct logistic activities that can be connected to purely logisitc professions. This is much less the case with VAL& VAS and support activities, as professions within this subdivisions can be linked to activities in other sectors, like manufacturing, construction, law, insurance or finance. As a result, these indirect logistic
39%
3% 22%
36%
0%
Percentage of total volume per
modality in 2015
Road Rail Inland water Sea Airactivities are difficult to measure in terms of absolute number of employees. Another difficulty is measuring scope of the logistic sector. Logistics are essential functions for firms from all sectors of the economy, and many of those perform these functions inhouse. The numbers in the table could therefor differ from the actual size of the logistic industry (TNO, 2013).
Table 2: key figures of Dutch logistic sector in 2015, source: Topsector Logistiek, 2016
The Dutch transport and logistics industry is currently witnessing the largest profit increases in 6 years, with the entire sector having grown 6,2% since the 2008 crisis (CBS, 2017). It is supply chain
management that has grown significantly: in the period 2010-2014 the added value of this subdivision saw a growth of 33,8% and a growth in employment of 14,3% (figure 1&2).
Production value Added value (in bn Euros) Added value Employment Subdivision (in bn Euros) (in bn Euros) (as percentage of production value) (in FTE) Transport and transhipment 67,8 29,3 43,22 433000 Storage and warehousing 33,3 14,4 43,24 212000 Supply chain management 24,1 11,3 46,89 168000 VAL & VAS 3,6 2,2 61,11 34000 Support activities 13,3 9,6 72,18 86000
Figure 1: Growth added value of subdivisions in de period of 2010-2014, data computed from Topsector Logistiek, 2016
Figure 2: Growth employment of subdivisions in de period of 2010-2014, data computed from Topsector Logistiek, 2016 0 5 10 15 20 25 30 35 40 Transport & transshipment Storage & warehousing Supply chain management
Growth added value 2010-2014 in %
Growth added value 2010-2014 in % 0 2 4 6 8 10 12 14 16 Transportation & transshipment Storage & warehousing Supply chain management
Growth employment 2010-2014 in %
Growth employment 2010-2014 in %4. Methodology
4.1 Research design
To answer the research question, a qualitative exploratory research design was chosen. According to Bryman (2007) exploratory research has the aim to uncover how, why or when a particular
phenomenon or situation occurs, by scoping out the size of the phenomenon, the underlying
mechanisms by which the phenomenon might be studies and to generate insights that might be useful in further research. The results are used to identify possible gaps in existing literature and to generate ideas as to why particular situations occur, as to uncover previously understudied fields for future inquiry.
Exploratory research starts by looking at a phenomenon more broadly, before narrowing it down by defining concepts, problems or implications in order to understand theoretically the diverse processes that occur in relation to the phenomenon.
There are limitations in exploratory research. It is not intended to provide conclusive and exhaustive evidence, and it can therefor only be used to gather insights into and to gain understanding of a particular phenomenon with various degrees of depth. Because no conclusive evidence can be provided, this type of research is very suitable for identifying important themes in the overarching field of inquiry, but less suitable to provide concrete solutions to any of the research problems that might come out of the research.
The main goal of this research is to study the transport and logistics industry and its particular dynamics with respect to value and labor issues. What is researched is which particular developments affect the value dynamics of firms within this industry and why, and how these value dynamics may affect, either positively or negatively, the position of labor within the industry. Challenges that might arise from the interactions between industry developments, value dynamics and labor issues are identified in order to understand the complex processes that are driving the transport and logistics industry today and to compare them to wider transformative processes in capital-labor relations that are informed by forces of globalization.
Uncovering concise evidence on how business strategies aiming at creating, enhancing and capturing value goes beyond the scope of this research and lies more within the realms of business studies. Rather, the exploratory research design lends itself well to answer questions on why firms behave the way they do in the face of developments on a global, national or regional/local scale and within particular economic, sociopolitical and cultural contexts. Additionally, exploratory research lends itself well to pinpoint distinct labor characteristics and how these might relate to industry-specific value dynamics.
4.2 Methods of data collection
3.2.1 Secondary literatureA number of methods were used in data collection. Secondary sources has been the primary base for this research. Large quantities of academic articles, policy documents, newspaper/magazine articles, market/industry surveys, government reports, documentaries, theses/dissertations and other kinds of secondary documentation was used to identify relevant themes and concepts to be used in further data collection. Also, CBS Statline, the public and electronic database of the Dutch national bureau of statistics was used. CBS Statline has provided rich secondary data on a number of topics related to industry characteristics and labor characteristics. Although the data that was collected through this database in combination with other secondary sources painted a rich image of what kind of
developments are occurring within the Dutch transport and logistics industry, much of the secondary data represents accounts on the general situation of the industry without giving much due credit to the underlying processes that drive developments related to value dynamics and labor issues.
4.2.2 Interviews
To overcome this problem, secondary data collection was supplemented with in-depth interviews. 12 in-depth interviews with relevant stakeholders were conducted in the period of April to September 2017. The stakeholders provided individual accounts and experiences on the value dynamics and labor issues within the industry. In the sample size, decisions had to be made to balance saturation and time constraints, and although the 12 interviews proved to be a rich source of data, the limited sample size affects the generalizability of the data. Sampling was done in part by non-probability convenience sampling; many potential respondents proved to be inaccessible, and those that were easy to access by were mostly reached through informal networking and subsequent snowball sampling. Other
stakeholders were contacted through email and telephone out of a large number sample of potential respondents. The sampling process provided a rich variety of stakeholders in terms of profession and in terms of the firms/organizations they represent, but a limitations of the sample is that it is not entirely representative of the entire population. These are the downsides of convenience sampling in accordance to accessibility.
The professions, their position in the firm/organization and the types of firms/organization varies significantly among the stakeholders. The professions of the stakeholders were as followed:
- Strategic modelling analyst - Truck driver
- Junior manager - Medior consultant - District manager
- Sales & new business manager - Operational specialist
- Researcher - Board member
- Business executive - Data analyst - Facility manager
Some of the stakeholders have requested not to mention their function in relation to the company/firm they work for due to privacy reasons, as their personal views might conflict with the values of their employer. To guarantee anonymity, respondents will be referred to with their function, regardless of the firm/organization they work for
The stakeholders were employed by the following firms/organizations: - Albert Heijn Dutch supermarket retailer
- Alutech European supplyer of electronic and non-electronic vehicle parts - ETE Transport Consultancy firm specialized in special transportation
- Heineken Multinational producer of beers and beverages - ILS: Firm specialized in lashing services
- ING: Dutch Bank
- FNV: Dutch labor union
- FNV Havens: Dutch union division for harbor labor - Tata Steel: Multinational steel manufacturer
- Tielbeke Transport: Firm specialized in road transportation, distribution and warehousing - TNO: Dutch research institute
- Van Straalen & Firm specialized in road transportation de Vries transport
Due to large variances, structured interviews were difficult to conduct. The stakeholders had different expertise, ranging from technical/operational, management, strategic and labor market/human
resources. Questions were generated according to their particular expertise and depending on the gaps identified as the data collection progressed. Some stakeholders were presented with the information gathered from previous interviews and asked to reflect on that information. The interviews were mostly unstructured or semi-structured. This largely unstructured nature follows the principles of exploratory research. The limitation of this method is the difficulty comparing the data. Another limitation, relating to the nature of in-depth interviewing and the sample size, the external validity of the results is limited and the findings can’t be generalized for the entire Dutch transport and logistics industry. As a consequence, the data was treated as subjective data and used to construct a storyline to navigate through the rich secondary sources that are available on the research topic.
4.3 Data analysis
The data from the in-depth interviews was analyzed by content and coded using Atlas.ti. The variety in stakeholders made comparison of data difficult, but it did highlighted the differential themes that are important to study in relation to the research question. Analysis of the data by Atlas.ti informed further secondary data collection. Because the qualitative data can’t be used as concise evidence for
that supported the accounts of the stakeholder. Analysis of the qualitative data and the secondary data was therefore a process of triangulation, in which the analysis of the former informed the search for the latter.
5. Value and the Spatial & Political Context
5.1 Global developments
After the global financial crisis of 2008, the increase of oil prices in 2010 and the European debt crisis of 2011, world trade has picked up from historically low levels and is experiencing growth (ITF, 2017). There are a number of developments associated with this growth. Firstly, the rise in GDP, especially in developing countries, creates a growing middleclass of consumers. In India and China, the average income is less than 8000 dollars per capita, but in the next ten years this is expected to grow significantly (Capgemini, 2015). It is estimated that the growth of the middle class, and their
accompanied income levels, will add 1.8 billion consumers to the consumer classes by 2025, spurring a rapid growth in demand for products and services (MGI, 2015). Secondly, urbanization levels are increasing worldwide. This is important because urban consumption differs significantly from rural consumption. Urban consumption levels are higher and require a different set of needs. Also, urban consumption patterns give firms the opportunity to take advantage of proximity and diversity (UNECA, 2015), and thus urbanization opens up large markets that can be supplied with an endless array of products and services. Thirdly, another element that increases global trade is the spatial disintegration of supply chains by the outsourcing or offshoring (or both) of production. Outsourcing and offshoring has long been a strategy for globally operating manufacturing firms in their search for cheap labor, and it continues increase in the future, resulting in more global flows of raw materials, semi-finished intermediate and finished goods. At the same time, and especially within the European Union, there is a tendency among firms to nearshore some of their activities to countries that have lower wages, but are still within the geographical and cultural proximity of the client firm. This nearshoring is rationalized by minimizing the costs of adapting to other cultures and to better respond to the higher demands of the market for products that are outmoded quickly (Bock, 2008). Eastern-European countries like Poland, Romania and Bulgaria are therefore increasingly becoming the host of production activities of European companies.
Volume of trade is thus increasing, both globally and regionally, and countries, both developed and upcoming, are scrambling to take advantage of the new opportunities that are offered by this increased demand for transport and logistics. Despite the global character of trade flows, the services transport
