GEOG 80 Transport Geography

Professor: Dr. Jean-Paul Rodrigue

Topic 2 Transportation Systems and

Networks
A.
B.
C.
D.

Transportation and Commercial Geography

Transport Costs
Transportation Networks
Transportation Supply and Demand

A Transportation and Commercial Geography

1. Trade and Commercial Geography
2. Tendencies in Commercial Geography
3. Commercialization of the Transport Industry

1. Trade and Commercial Geography

Commercial geography

Economic systems are based on trade and transactions.

Specialization and efficiency requires interdependency.
Understand transportation.
Predict the outcome of transport demand.
Based on contracts and transactions:
Undertaken through a movement of freight, capital, people and
information that all possess weight, volume and value.

Commercial and Transport Geography

Commercial Geography
Transactions
Movements
Transport Geography

1. Trade and Commercial Geography

Conditions for trade
Availability:
Commodities for trade.
Must be a demand.
A surplus must exist at one location and a demand in another.

Transferability:
Policy barriers (tariffs, custom inspections, quotas).
Geographical barriers (time, distance).
Transportation barriers (the simple capacity to move the outcome of a
transaction).

Transactional capacity:
Must be legally possible to make a transaction.
Recognition of a currency for trading.

1. Trade and Commercial Geography

Flows
Value:
Negotiated value and are settled in a common currency.
Balance of payments.

Volume:
Physical characteristic, mainly involving a mass.
Weight is variable when trade involves raw materials.

Scale:
Range of a transaction.
Retailing transactions tend to occur at a local scale.
Transactions of a multinational corporation are global in scale.

2. Tendencies in Commercial Geography

Current commercial context

Free trade.
Differences in levels of development.
Technological, industrial and geopolitical changes.
Global and regional interdependence and competition.
Growing economic opportunities offered by transportation.

Global GDP, 2002

Share of Global GDP Growth, 1995-2002

2. Tendencies in Commercial Geography

Liberalization of trade
Implementation of the World Trade Organization.
Positive trend in the growth rate of world trade and industrial
production.
Trade amounts to 6,000 billion dollars each year.
Growth of world service trade (18.6 % of all trade).
Growth of the share of Asia in world trade (about 25% of all
trade).

World Trade Flows, 2001 (billion $US)

255
188

195

Western Europe
(1,677)
252

North America
(391)

312

376

207

333
205
287

Asia / Pacific
(722)

96

Rest of the
World
(285)

174

Share of Asia in World Trade, 1980-2003

2. Tendencies in Commercial Geography

Organization of production
Division of labor:
Design, planning and assembly in the manufacturing process.

Interlocking partnerships in the structure of manufacturing:

Increased the trade of parts and the supply of production equipment
around the world.
One-third of all trade takes place among parent companies and their
foreign affiliates.

ISO norms:
Comparison between various enterprises around the world.
Applicable to the manufacturing and services industries.
Competitiveness of enterprises linked to the imperative of total quality.

2. Tendencies in Commercial Geography

Relocation of production
Change in the structure of export and import of world economies.
Adoption of standards.

Worldwide Mergers and Acquisitions, 1980-2001

3. Commercialization of the Transport Industry

Transportation is a traded service
Openly and subject to full market forces.
Form of public control or ownership.

Costs
Negotiated between the provider of the service and the user.
Subject to some arbitrary decree (price fixing such as public
transit).

Commercialization

How transportation is brought to the market.

Investments in infrastructure, modes and terminals.
Either a private or public endeavor.
Era deregulation and divestiture.

B Transport Costs
1. Transport Costs and Rates
2. Type of Transport Costs

1. Transport Costs and Rates

Context
Users have to negotiate or bid for transportation.
Conditions (tariffs, salaries, locations, fuel costs) are changing
constantly.
Costs for gathering information, negotiating, and enforcing
contracts and transactions.
Enterprises and individuals take decisions about how to route
traffic through the transport system.
Transport costs can account for 20% of the total cost of a
product.

1. Transport Costs and Rates

Transport costs
Monetary measure of what the transport provider must pay to
produce transportation services.
Fixed (infrastructure) and variable (operating) costs.
Depend on a variety of conditions:

Geography.
Infrastructure.
Administrative barriers.
How passengers and freight are carried.

Three major components, related to transactions, shipments and

the friction of distance, impact on transport costs.

Fuel Costs Versus Annual Vehicle Mileage, United States,

1960-2000

1. Transport Costs and Rates

Friction of distance
Most basic component of transport costs.
The more it is difficult to trade space for a cost, the more the
friction of distance is important.
Expression of friction:
Length, time, economic costs or the amount of energy used.

Varies greatly according to the type of transportation mode

involved.
Impacts of technological innovation.

Conditions Affecting Transport Costs

Condition

Factors

Examples

Geography

Distance, physiography, Shipping between France and

England vs. shipping between France
accessibility
and the Netherlands

Type of product

Packaging, weight,
perishable

Shipping coal
Shipping flowers or wine

Economies of
scale

Shipment size

A 747 compared to 737 (passengers)

A ULCC compared to a VLCC (freight)

Trade imbalance

Empty travel

Trade between China and the United

States

Infrastructure

Capacity, limitations,
operational conditions

The Interstate

Mode

Capacity, limitations,
operational conditions

A bus compared to a car

Competition and
regulation

Tariffs, safety,
ownership

The European Union, The Jones Act

Different Friction of Distance Functions

1

Costs

Zone Change
Fixed Costs
Distance

Transshipment Costs

Shipment Size and Transport Costs

Transport Costs by Industry Type, 1999

1. Transport Costs and Rates

Rates
Price of transportation services paid by the consumer of them.
Negotiated monetary cost:
Moving a passenger or a unit of freight between a specific origin and
destination.

Difference between costs and rates:

Results in profit or deficit from the service provider.

Rate setting:
Public transit: rates are often fixed and the result of a political decision
where a share of the total costs is subsidized by the society.
Freight transportation and many forms of passenger transportation (e.g.
air transportation): rates are subject to a competitive pressure.

2. Types of Transport Costs

Freight on board (FOB)
Price of a good is the combination of the factory costs and the
shipping costs from the factory to the consumer.
Consumer pays for the freight transport costs.
The price of a commodity will vary according to transportation
costs.

Costs-Insurance-Freight (CIF)

Price of a good is a uniform delivered price for all customers.

No spatially variable shipping price.
Average shipping price is built into the price of a good.
CIF cost structure can be expanded to include several rate
zones.

FOB and CIF Transport Costs

Costs

Freight-on-Board

Cost-Insurance-Freight

Production Costs
Distance

Zonal Freight Rates

Real transport cost

Costs

D1
D2

II

Flat zonal rate

III
Distance

IV

2. Types of Transport Costs

Terminal costs
Related to the loading, transshipment and unloading.
Two major terminal costs:
Loading and unloading at the origin and destination, which are
unavoidable.
Intermediate (transshipment) costs that can be avoided.

Linehaul costs
Function of the distance over which a unit of freight or passenger
is carried.
Weight is also a cost function when freight is involved.
Commonly exclude transshipment costs.

2. Types of Transport Costs

Capital costs
Physical assets of transportation mainly infrastructures, terminals
and vehicles.
Purchase or major enhancement of fixed assets, which can often
be a one-time event.

Fixed and Variable Costs and Service in the Transportation System

Characteristic

Fixed Infrastructure

Variable Costs

Examples

Highways, rail tracks, airports, Trucks, railcars, planes, ships

ports

Ownership

Mostly public

Mostly private

Lifespan

Very long (decades)

Short to average (5 to 20
years)

Rate of change

Slow

Rapid redeployment

Impact on service Shapes accessibility

Shapes level of service

Competition

Source of comparative
advantages

Level the playing field