Is Transport, Either Globally or Nationally a Commodity in Australia - Literature review Example

Is Transport, Either Globally or Nationally (Australia) a Commodity Introduction Transport is a distinct aspect of any society or economy for that matter. Transport demonstrates a close connection to the style of life, the variety and location of activities and more importantly products and services that are accessible or available for utilization. With the progress in globalization and advancement in technology, the importance of transport has increased owing to the great need to supply products, processes, people, capital, information and technology among other resources on a global scale as discussed by Rodrigue (2012). Mathew & Rao (2006) concurs by stating that transport has practically generated changes in the style of living and influencing how communities are organized and hence, having a fundamental impact on development of civilizations. Presently, transport systems are incorporated in commodity chains which has resulted in increasing rate of interconnectedness between production, supply and market demand thus, effective and efficient systems of distribution supporting international commodity chains/ networks as noted by Gereffi & Miguel (1994). On the other hand, commodity is defined as what provide value in the market environment and therefore, a commodity is an item of development and as such, is the rational pivot point of development efforts (Hartwick, 1998). This informs this report, which is a literature review seeking to analyze the question: Is Transport, either globally or nationally (Australia) a commodity. Literature review Defining transport According to Tseng et al. (2005), transport can be defined as the process of moving goods and raw materials from the producer to the manufacturer and shipment of finished products from the manufacturer to the end users. Often, the transportation operations influence the efficiency of the movement of products. According to the author, the progress in the methods of transport and the transport management principles enhances the speed of delivery, the moving load, the quality of service, the operation costs, energy efficiency and more significantly, the utilization of facilities as supported by Rodrigue (2012). Chang (1988) argues that transport forms a crucial part in the management of logistics since insufficient and ineffective transport systems makes it difficult to generate the logistic benefits into full play. Blauwens(1988) argues that transport is a commodity by indicating that an efficient and efficient transport system in carrying out logistic activities offers enhanced logistics efficiency, it minimizes operation costs and more importantly it ensures and improves service quality (Blauwens, 1988). It is important to mention that transport is the most valuable and critical variable among the elements of business logistic systems since more than two thirds of expenses of business’ logistic costs are allocated to transportation as reported by Chang (1988). The author notes that on average, the transport costs account for more than 6% of market revenue and more than 40% of logistic costs. Primarily, transport infrastructures allows raw materials and finished products to move and it offers timely and global efficacy to enhance value-added under the lowest cost principle. More often than not, transport impacts on the outcomes of logistic activities and more so on production and sales (Hartwick, 1998). Defining commodity According to Rodrigue (2012), commodities refers to resources that can be utilized and which can be amassed for a duration of time, substituted as part of a business deal or bought in certain markets. According to the author, there are commodities which are fixed and it is impossible to transfer them save for title which encompasses land, logging, mining and fishing among others, whose value is generated from the utility and the prospective level of extraction. In addition, there are bulky commodities such as metals, oil, sugar, livestock and coffee among others whose value is generated from utility, supply and demand. Tseng et al. (2005) highlights that there are strategic commodities and for items to qualify as such they ought to have accessible existing and prospective domestic and foreign market in relation to demand. Sufficiency to enhance business growth and development, prospective to improve income and it should generate high degree of support from public and private sector in terms of infrastructure, financing and technology. Is transport a commodity? Rodrigue (2012) suggests that commodities are considered as such when they meet three criteria namely, they must be standardized and in a ‘raw’ form, they must have utility/ or have a shelf life once they are delivered and finally their prices must vary sufficiently to justify establishing a market for them. Based on these criteria for defining a commodity, it is therefore safe to state that transport is not a commodity but an important factor in interconnecting production, supply and market demand, which facilitates effective and efficient systems of distribution supporting international commodity chains/ networks. Mathew & Rao (2006) argues that transport acts as the link connecting the elements of place, quality, time, and utility of goods and services. For instance, in assessing the link between the element of time, place and cost of a certain commodity A, when commodity A is manufactured at country point 1 and it is needed by customers of another country at point 2 distant X from point 1. The price of commodity A is reliant on the distance X between point 1 and 2 and the system of transport between the two points. An efficient and effective transport system, the price of commodities reduces and in inefficient transport system, the price of the commodity increases as supported by Mathew & Rao (2006). Rather than generating utility for consumption as commodities often do, transport facilitate the movement of goods along the production line and supply network in order to help convert them from raw to more usable finished products as argued by Rodrigue (2012). Gereffi & Miguel (1994) suggests that transport connects the factors of production in a multifaceted web of links between producers and the end users. The result is more often than not, a more resourceful division of production through utilization of geographical relative benefits and the means to create economies of scale and capacity (Tseng et al. 2005). This means that the efficiency of labour, space and capital as real commodities, is improved with the effectiveness of distribution and product mobility. Chang (1988) indicates that transport efficiency is evaluated by establishing its networks in relation to current and new routes. Performance in terms of cost efficiency, reliability in terms of time performance, productivity in relation to accessing diverse and broader base of inputs and markets for the increased diverse outputs. Finally, market size in terms of accessibility to a wider market base, which improves the economies of scale in producing, supplying and consuming. In support of an earlier argument, transportation carries out the role of linking the various steps of production, which leads to conversion of resources into valuable goods/ commodities that effectively and efficiently meets the needs, demands, expectations, wants, tastes and preferences of the consumer wherever and whenever they are (Krumwiede & Sheu, 2002). Transport as a process allows efficient and effective transferability of commodities both raw materials and finished products. Low costs of transport does more than improve business, they help enhance the value of commodities (Gereffi & Miguel, 1994). According to Rodrigue (2012), transport is more of an enabling factor than it is a commodity. Although transport is not the basis of international business, it is a condition without which international trade and globalization would be non-existent. Be it as it may, failure of global transport systems to support massive flows of commodities weakens the access to the international market and the gains, which can be generated from international business. Transport is required and used in international trade as the mechanism used in distribution and supply of commodities between various production and market points (Blauwens, 1988). Among the two elements of transportation that facilitate movement of commodities in a global scale includes transport infrastructure which deals with the physical components such as vehicles, networks and terminals whose effectiveness or lack of it impacts on the cost and value of a commodity. In addition, transport services, which deal with services such as logistics, supply, insurance, marketing and finance among others that similarly influence the cost and the quality of commodities on transit as discussed by Rodrigue (2012). A key aspect in commodities is that they are traded in either cash markets or future markets and since transport is not a commodity, it cannot be traded (Gereffi & Miguel, 1994). The liquidity and stability of exchange of commodities just like the performance of transport systems helps market players such as producers, manufacturers and consumers to operate proficiently and more competitively (Gereffi & Miguel, 1994). Conclusively, consumers cannot effectively and efficiently derive the utility of commodities without transport services since these services allows the counter flow of both part and finished products. Conclusion As indicated in the literature review, transport is not a commodity and it is more of an enabling factor in international business and a process that facilitates efficient counter flow of commodities from producers to manufacturers and to the end users who are the consumers of the finished products or commodities. It forms a critical component in the line of production by facilitating transferability of commodities both raw materials and finished products. As highlighted in the report, transport and logistic systems interconnect where the latter depends on the formers to effectively and efficiently perform while an efficient logistic system can aid in enhancing transport development. In addition, transport costs constitute the highest costs within logistic systems and its improvement therefore, could translate in better performing logistic system. This means that failure to connect transportation to logistic systems; logistic strategies cannot fully achieve the anticipated outcomes. Conclusively, transport, either globally or nationally (Australia) is not a commodity. References Blauwens, G.1988. The evaluation of timesavings in commodity transport. International Journal of Transport Economics, vol. 15, no. 1 ISSN: 0391-8440 Chang, Y.H. 1998. Logistical Management. Taiwan: Hwa-Tai Bookstore Ltd. Gereffi, G. & Miguel K. (eds.) 1994. Commodity Chains and Global Capitalism. Westport, CT: Praeger. Hartwick, E. 1998. Geographies of consumption: a commodity-chain approach. Environment and Planning D: Society and Space, vol. 16, no. 4, pp. 423 – 437, doi: 10.1068/d160423 Krumwiede, D.W. & Sheu, C. 2002. A model for reverse logistics entry by third-party providers. Science Direct, vol. 30, pp. 325-333. Mathew, T.V. & Rao, K.V.K. 2006. Introduction to Transportation Engineering. NPTEL, pp 3.1-3.5 Accessible from http://www.cdeep.iitb.ac.in/nptel/Civil%20Engineering/Transportation%20Engg%201/03-Ltexhtml/nptel_ceTEI_L03.pdf Rodrigue, J. 2012. Commodity Chains and Freight Transportation. New York: The Geography of Transport Systems. Accessible from http://people.hofstra.edu/geotrans/eng/ch5en/conc5en/ch5c3en.html Rodrigue, J. 2012. Transportation and Economic Development. New York: The Geography of Transport Systems. Accessible from http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/ch7c1en.html Tseng, Y., Tylor, M.A.P., & Yue, W.L. 2005. THE ROLE OF TRANSPORTATION IN LOGISTICS CHAIN. Proceedings of the Eastern Asia Society for Transportation Studies, Vol. 5, pp. 1657 – 1672. Accessible from http://www.siam.org/journals/plagiary/1657.pdf Read More