The Evolution of the Scope and Taxonomy of Logistic Areas

The Evolution of the Scope and Taxonomy of Logistic Areas

Source: Adapted from: T. Notteboom, F. Parola, G. Satta and M. Risitano (2016) “A Taxonomy of Logistics Centres: Overcoming Conceptual Ambiguity”, Transport Reviews, 37(3), pp. 1-24.

The setting of logistics activities has been contingent on an evolutionary process impacted by changes in technology, the extent and capacity of transport infrastructure, and public policy. This implies that both the scope and taxonomy of logistics activities have changed to become more comprehensive, integrated, and complex:

  • Logistics. The evolution of the scope of logistics leads from the context where logistics tasks were highly fragmented to its functional integration and, eventually, its automation. Initially, warehousing was at the core of what was then logistics; a simple function of storage since most of the goods was produced and sold nationally. Consolidating logistics tasks eventually led to the distinct branches of material management and physical distribution, although physical distribution appears to have emerged first. With ongoing globalization and the diffusion of information technologies, the functional integration of tasks led to the formal emergence and recognition of logistics in the 1980s as a field of application. Then, logistics increased in scope to become supply chain management; the use of logistics not just to improve the efficiency of freight distribution but to improve its competitiveness. This includes integrating marketing, finance, and additional information technologies to coordinate production, distribution, and consumption.
  • Transportation. Palletization enabled by the 1950s transportation load units that are much more suitable to the application of logistics since different cargo types could be more effectively stored on racks and moved between transportation modes (particularly between warehouses and trucks). Containerization opened a whole new set of opportunities for logistics by expanding trade opportunities and the division of production. This was further expanded by the setting of intermodal rail systems effectively connecting seaports and their hinterland. Logistics took a global reach since the means of transport became further mechanized and automated. Advances in warehouse management and sorting capabilities led to their further integration with freight distribution, particularly with cross-docking that enabled flow-based logistics. Air cargo operations, driven by the growth of high-added value goods such as electronics, also led to the setting of their logistical activities.
  • Public policy. Public sector involvement in logistics remained indirect for an extended period of time, mainly to attract private investments. The focus was initially on trade liberalization, where trade barriers became less restrictive, particularly between neighboring nations. This indirectly favored the expansion of logistics activities. The 1970s saw a further focus on promoting exports as a tool for economic development, particularly in the then-newly industrialized economies of East Asia (Taiwan, South Korea, Hong Kong, and Singapore). As globalization became more evident, the focus expanded towards trade facilitation, such as improving customs procedures and the regulatory hurdles to trade as well as mitigating key infrastructure bottlenecks. More recently, many public entities started to intervene directly in the setting of comprehensive logistics projects, often as landlords (setting of special public agencies). Trade and logistics were perceived to be of national interest and fundamental to the competitiveness of nations.

The taxonomy of logistics areas (clusters) is commonly considered from a modal orientation (port, rail, airport, road), its geographical scope (national, regional, international), and function (single to multiple). Still, this taxonomy is the outcome of an evolution of the regulatory setting, the types of terminals, and the main activities involved in logistics:

  • Regulations. Historically, the concept of free zones (areas having a preferential taxation regime, or being outside the existing taxation regime) is enduring, since they can be found through Antiquity and the Middle Ages. Contemporary free trade zones were set through the 1930s and 1960s, mostly to facilitate trade and some level of manufacturing. The model was expanded in the 1980s and 1990s to focus on manufacturing, with export processing zones and special economic zones offering incentives (such as low taxes) as long as a large share of the output was exported. This became the standard regulatory template for many developing economies as a tool to develop their international logistics sector.
  • Terminals. Transport terminals have also evolved to support new logistical configurations. The standalone intermodal terminal simply transiting cargo became, in many cases, an inland (or dry) port with the co-location of logistics zones. A similar process occurred along large port gateways that became more closely integrated with their hinterland, with corridors connecting them to inland ports.
  • Activities. As a planned cluster of activities, the industrial park emerged in the 1960s and took different forms depending on the focus (light manufacturing, heavy industries, agribusiness). Formally designed logistics zones emerged in the 1990s when the footprint taken by logistical activities expanded, requiring its own space, investment, and governance structure. The concept of logistics zones further expanded in the 2000s with logistical platforms focusing on a range of services and infrastructure supporting supply chains. The emergence of global logistics hubs can be observed at a sufficient scale and scope.