Transport Logistics

1.2.2. Realignment of supply chains

Companies are realigning their supply chains. In many sectors, companies have been

concentrating on core competencies and sub-contracting non-core, ancillary activities to outside

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contractors. Vertical disintegration of production is adding extra links to the supply chain and

increasing the transport intensity of the production process.

At the same time, companies have steadily expanded the geographical scale of their sourcing and

distribution operations. Also, in order to overcome the tension between centralised production and

product customisation, companies are centralising the core production of standard products, often in

countries with low labour costs, and delaying their customisation until products reach their regional

markets. The number of stock keeping units is minimised until the point of customisation, thus

minimising inventory risk and costs, and reducing lead-times.

An example of this is the Personal Computer (PC) manufacturing industry which has reformed its

activities to take advantage of the globalisation of production networks to reduce costs. In order to

respond flexibly to changes in demand while avoiding increases in inventories of finished products,

the industry has created a global product network in which final assembly is placed as close as

possible to end markets.

In regard to delivery, direct delivery seems to be expanding for products with a higher ratio of

value to weight. This reflects the growth of direct marketing, particularly through electronic media. On

the other hand, in several countries in Europe, some large retailers are taking responsibility for the

supply chain from their suppliers to final purchasers.

In realigning supply chains, international transport is becoming increasingly concentrated at a

smaller number of hub ports and airports in order to enjoy economies of scale.