Transportation and Distribution Management - Essay Example

? Transportation and Distribution Management Table of Contents Introduction 3 Discussion 3 Air Transport and Economic Growth 4 Air Transport and Global Trade 5 International Trade Value 5 Role of Air Transport in International trade 6 Importance of Passenger Air Services 7 Advantages of Air Transport 7 Conclusion 8 References 9 Introduction The history of airplane dates back to 1903 when Wright brothers developed the first powered, controlled, and heavier than air flight (Ferguson, 2005, p.506). After the invention, development process continued and finally airplane was made available for commercial purposes in the 1950s. The commercialization of aviation made air transport as the most swiftest and flexible mode of transportation. Slowly with the passage of time air transport has been able to gain large acceptances in the market place. Air transportation is now considered as one of the major facilitators of global trade. It offers enormous benefits to the consumers. Some of the major benefits offered by air transportation are wider coverage, fastest means of communication, and high security among various other advantages. The purpose of the study is to uncover the importance of air transport or aviation in the process of facilitating international trade. The importance of air transport in the global trade will be further supported by real world examples. In this context some real examples will be provided to depict the importance of aviation. Apart from that the report will also shed light on various areas, pertaining to the importance of aviation in cross border transaction. The advantages of making use of air transport will be also highlighted. Finally the report will conclude highlighting the extant up to which air transport acts as the facilitator of international trade. Discussion This section will mainly highlight the relevant theories and practical examples of air transport to depict its importance in the world trade. Air Transport and Economic Growth Like any other means of transportation, Air transport is allied with global trade in two different ways. First, air transport is used as a service mechanism, and secondly it is being used as a crucial intermediate service provider for a number of trading activities such as tourism. Numerous studies have illuminated the fact that it is important for every country (mostly developing countries) to focus on ensuring an effective, efficient and consistent air transport to gain maximum, from the activities of international trade. With rapid globalization and increased cross border trade activities, the importance of air transport got a greater boost. In addition, the significance is expected to further enhance due to rapid technological innovation, increased market access of multinational companies and deregulation (WTO, 2005). Despite the increasing importance, the industry has passed through difficult times. The industry constantly struggles in order to survive and sustain in the market place. Whenever a big carrier gets into problem, they make headline and if they collapses the economy of that country gets highly affected. This depicts how air transport is important even for the national economy. Air transport is thus considered to be one of the most important industries of the world. Besides its service and technical achievements makes it as a supreme contributor towards the growth and advancement of modern society. The growth is also unmatched with any other form of transportation. The rising demand of air transport is also for the reason of increasing cross border trade activities. It facilitates rapid movement of people from one place to the other and also makes possible to transport goods worth billions of dollars to several markets throughout the globe (Air Transport Action Group, 2005, p.4). Air Transport and Global Trade The most important economic benefit offered by air transport on the global trade is the ‘spin-off effect’. It plays a crucial role towards the promotion of financial growth in countries around the world. Air transport offers assistance in different stages of the economic development. It is also a significant facilitator of trade among the countries of the world. Air transport highly enhances the global reach of the companies, thereby allowing them to operate in a number of foreign markets. In addition, it ensures that the product reaches from one country to the other in the shortest possible time and increases the responsiveness of customer demands to a large extant. International Trade Value The performance of an international trade is determined on the basis of prosperity and economic growth. Last few decades have witnessed that the nations which have grown faster, had the fastest progress in the global trade activities. Nevertheless the surge in global trade has been pushed by the following factors:- Reduction in barriers: - The establishment of free trade blocs or free trade zones such as North American Free Trade Agreement (NAFTA), European single currency and market etc. and increased authority of WTO has led to the reductions in trade barriers. Apart from that several bilateral trade barriers were also removed. Globalization: - Many companies have started international operations and appointed foreign subsidiaries which increased global trade. Political developments: - Increased political stability has allowed numerous companies to operate on other countries. Technological advancement: - With the rapid developments in technology, communication system has been like never before. It has allowed business ventures to control the operation of a company sitting in some other parts of world. Hence it has been able to reduce the operating cost also. Transportation development: - Finally and most importantly the factor, which played a major role is the development of transportation system. With the introduction of cargo jets, companies have been able to transport large number of goods at a time and that too within few hours. It has also ensured increased availability of products in the host countries (Chaney and Purney, 2004, p.83). Role of Air Transport in International trade Most of the cargo jets deliver raw materials or finished products. Numerous studies confirms that around 40 % of the goods of inter regional trade is transferred with the help of air transport. However in the global context around 25 % of the goods are transferred by means of air transport. The corresponding value of the total air transportation in the year 2004 is around US$ 1,750 billion. The air transport companies have also offered a range of other services. One of the most prominent services it offers is the ‘same day’ or ‘next day’ delivery services for the unguent requirements. The items that fall into this category include foreign newspapers, perishable goods as well as post & packages. It is only possible for the air transportation system to facilitate such things. To cite an example, ebay.com is a website, sells online products. Once an overseas client places an order into their website, the company delivers the product to the client within 3-4 working days. In this context eBay uses air transport to deliver their products on time and maintain a cordial relation with the clients. Hence the example clearly depicts the importance of air transport in facilitating global trade. Importance of Passenger Air Services Passenger air services play crucial roles in facilitating opportunities of trade. It allows organizations to promote their business in the international market and also helps companies to interact physically with the overseas clients. Therefore through effective communication and better personal contact, among the buyers and sellers ensures long term relationship. In other words air transport helps the company to make new sales and also to satisfy the demands of the existing customers. For example, most of the Information Technology (IT) companies work with foreign clients and they mostly communicate via e-mails or video conferencing. Nevertheless at urgent situations video conferencing or e-mails does not turn out that much effective. Therefore in such cases, representatives from the company have to visit the client physically. In this context air transportation plays the central role of serving the purpose of the company. Advantages of Air Transport Apart from the usual benefits air transport also offers a number of advantages in facilitating international trade. Some of the evident factors are presented below:- The cost of inventory is low. Negligible breakage. Loss or damage of goods due to improper and rough handling reduces to the minimum level. Less packaging. The products can be delivered at the market within the stipulated time frame. Lesser administrative cost (Bhat, 2010, p.192). Offers more security in comparison with the sea transport. Conclusion The report was about the importance of air transport in facilitating international trade. The study revealed that companies depend heavily on air transport for the purpose of distributing their products to the foreign market. The study also highlighted that, globally around 25 % of the goods transfer is carried out through air transport. Face to face client interaction, sending urgent products and fastest reach are some of the advantages of air transport. Therefore it can be concluded that air transport is not only the best mode of transportation for the perishable goods but also for the goods that has low volume and high value. Furthermore it can be also affirmed that to a large extant the air transport acts as the facilitator of international trade. References Air Transport Action Group, 2005. The Economic & Social Benefits of Air Transport. [pdf] Available at: [Accessed 28 September 2012]. Bhat, M. K., 2010. International Trade & Financial Environment. New Delhi: Ane Books Pvt Ltd. Chaney, G., and Purney, D., 2004. Advantage Test Prep Grade 4. California: Creative Teaching Press. Ferguson, R., 2005. The Handy History Answer Book. 2nd ed. Michigan: Visible Ink Press. WTO, 2005. International Trade in Air Transport: Recent Developments and Policy Issues. [pdf] Available at: [Accessed 28 September 2012]. Read More