Missing links: Logistics, governance and upgrading in a shifting global economy

ABSTRACT

This article seeks to argue that logistics services, and the independent logistics industry in particular, should be afforded much more attention within political economy approaches to the global economy. Widespread outsourcing processes and the increased sophistication of logistics provisions mean that the industry has arguably evolved beyond being a mere service input to occupying an integral and strategic role within many global industries. It is, therefore, intimately connected to debates about shifting governance regimes and upgrading dynamics within those industries. Conceptualising logistics from a global production network (GPN) perspective offers the potential for revealing both (1) the contribution of logistics providers to value and upgrading dynamics in client sectors and (2) the ways in which the logistics industry itself can be thought of as a multi-actor value-generation network with its own strategic and upgrading dynamics. The article distils the key contributions and limitations of prevailing business studies approaches to logistics, before charting a four-pronged research agenda that foregrounds the political economy of logistics provisions within the global economy. The analysis concludes by thinking about the implications of on-going post-crisis restructuring within the world economy for the proposed research agenda on logistics and GPNs.

KEYWORDS:

• Global production networks
• governance
• logistics
• upgrading
• research agenda
• value

ACKNOWLEDGEMENTS

This paper draws upon a Capturing the Gains Research Network scoping paper entitled ‘Economic and Social Upgrading in Global Logistics’ co-authored with Martin Hess. Martin's involvement and the financial support of Capturing the Gains are both gratefully acknowledged. The paper was first presented at a workshop at the National University of Singapore in December 2011; thanks to the participants for their comments and also to the organisers Jeff Nielson, Bill Pritchard and Henry Yeung for their cogent feedback. I also appreciate the helpful guidance of two anonymous reviewers. Finally, thanks are also due to Ross Jones for his research assistance on the leading global logistics providers.

Notes

¹This paper adopts a deliberately broad definition of the logistics industry, encompassing firms active in any area of logistics or supply chain management activity. This reflects the importance of revealing the connections between different kinds of logistics providers if we are to better understand the contemporary global industry.

²GPN research has somewhat different origins and emphases to cognate global commodity chain (GCC) and global value chain (GVC) approaches. In the current context, however, and in the spirit of the workshop for which this paper was originally prepared, this paper does not belabour the differences between the various approaches. Although flavoured by the author's position with the GPN approach, for the most part, the analysis does not seek to distinguish between the constituent approaches with respect to the arguments being made about logistics.

³Upgrading is a well-established concept in GPN and cognate literatures. It seeks to capture the strategies pursued by economic actors to improve their relative position within global production systems (see Humphrey and Schmitz, 2002, for more).

⁴The past 10–15 years have seen the publication of a wide range of overview texts in this vein, including, most notably, Chopra and Meindl (2009), Christopher (2005), Dornier et al. (1998), Rushton and Walker (2007), Skjøtt-Larsen et al. (2007), Voortman (2004), Waters (2010) and Wood et al. (2002). The field is also characterised by a broad range of some 20–30 journals aimed at both academics and practitioners. The key journals include Asia-Pacific Journal of Marketing and Logistics; European Journal of Operations Research; Food Logistics; International Journal of Logistics Management; International Journal of Logistics: Research and Applications; International Journal of Physical Distribution and Logistics Management; International Journal of Operations and Production Management; International Journal of Shipping and Transport Logistics; International Journal of Transportation Management; Journal of Air Transport Management; Journal of Business Logistics; Journal of Supply Chain Management; Journal of Transport Economics and Policy; Journal of Transportation Law, Logistics, and Policy; Logistics and Transport Focus; Logistics and Transportation Review; Logistics Management; Logistics Manager; Logistics Research; Maritime Economics and Logistics; Outsourced Logistics; Supply Chain Europe; Supply Chain Management Review; Supply Chain Management: An International Journal; Transport Logistics; Transport Policy; and Transport Reviews.

⁵In the literature, an important distinction is often made between logistics and supply chain management (cf. Christopher, 2005: Rushton and Walker, 2007). While logistics, as already noted, refers to the movement of materials and goods through a production process to a point of consumption, supply chain management (SCM) is seen as a broader concept, which refers to the integrated management of all parts of a supply network from originating suppliers to end customers. It is, therefore, about the harmonisation and standardisation of supply chain practices across firms within a production network.

⁶It is worth noting that there is scepticism in some quarters as to whether 4PL represents a management fad or real-world reality. Used in a slightly broader sense, however, to denote logistics providers that are able to offer a one-stop shop to demanding transnational clients, the term does capture the emergence of novel forms of partnership between client firms and logistics providers that are non-asset-based and go well beyond the usual 3PL relationship.

⁷For more, see Fowler (2006), Hesse and Rodrigue (2004), Notteboom and Rodrigue (2008) and Rodrigue (2008).

⁸For more, see Almotairi and Lumsden (2009), Bichou and Gray (2004), Goetz and Rodrigue (1999), Hesse (2008), Stopford (2009), Wang and Olivier (2006) and Wang et al. (2007).

⁹As seen, for example, in the well-publicised acquisitions of Nedlloyd by Maersk (2005), Tibbett and Britton by Exel (2004) and, in turn, Exel by Deutsche Post World Net (2005) – Deutsche Post had previously acquired DHL (2003) – among many others (for more examples, see Rushton and Walker, 2007).

¹⁰I thank one of the anonymous referees for this important observation.

¹¹Beyond these broad generalisations, it is important to recognise the different intersections of the above dynamics in different parts of the workforce. For example, there are important distinctions between maritime workers (see Bonacich and Wilson, 2008: Ch. 7), dockers/longshoremen (see Turnbull, 2000; Turnbull and Wass, 2007), truck drivers (see Bonacich and Wilson, 2008: Ch. 8) and warehouse workers (see Bonacich and Wilson, 2008: Ch. 9). Relatedly, Wright and Lund (2006) chart variations in labour control practices across three distribution centres within the Australian retail sector.

¹²The interconnectedness of various logistics and transport sectors also allows for the possibility of inter-union cooperation (cf. Bonacich, 2005) at different levels: one such platform for global cooperation is the International Transport Workers’ Federation (ITF), which represents 751 unions and 4.6 million workers from 154 countries.

¹³For example, by February 2011, DHL had established seven Asia-Pacific Fashion and Apparel Centers of Excellence in Cambodia, Bangladesh, Hong Kong, India, Pakistan, Sri Lanka and Vietnam.

¹⁴Although there is not enough space to discuss such issues here, for some commentators, these changes are indicative of a multipolar ‘Post-Washington Consensus’ global economy. As Birdsall and Fukyama (2011: 46), for instance, argue, ‘in the next decade, emerging-market and low-income countries are likely to modify their approach to economic policy further, trading the flexibility and efficiency associated with the free-market model for domestic policies meant to ensure greater resilience in the face of competitive pressures and global economic trauma. They will become less focused on the free flow of capital, more concerned with minimizing social disruption through social safety net programs, and more active in supporting domestic industries. And they will be even less inclined than before to defer to the supposed expertise of the more developed countries, believing – correctly – that not only economic but also intellectual power are becoming increasingly evenly distributed.’

¹⁵For recent overviews of the logistics sectors of the BRICS economies, see World Bank (2010) on Brazil, Capgemini (2007) on Russia, McKinsey & Company (2010) on India, Liu et al. (2011) on China, and CSIR (2010) on South Africa.

¹⁶The nature of the products involved may also evolve. As Kaplinsky and Farooki (2010: 150) argue, ‘low levels of per capita income mean that the nature of demand will be for cheap, undifferentiated goods with low acquisition cost, which runs against the major trends in demand in northern economies after 1970 that increasingly favoured differentiated, high-quality positional products’.

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Notes on contributors

Neil M. Coe

Neil M. Coe is Professor of Economic Geography at the National University of Singapore. His research interests are in the areas of global production networks and local economic development; the geographies of local and transnational labour markets; the geographies of innovation; and institutional and network approaches to economic development. He has published over 65 articles and book chapters on these topics, and is a co-author of Spaces of Work: Global Capitalism and the Geographies of Labour (Sage, London, 2003) and Economic Geography: A Contemporary Introduction (Wiley, Hoboken, 2013).