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 have been contingent to 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 context where logistics tasks were highly fragmented to its functional integration and eventually its automation. Initially, the function of warehousing was at the core of what was then logistics; a simple function of storage since most of the goods were produced and sold nationally. The consolidation of logistics tasks eventually lead 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 competitiveness. This includes the integration of marketing, finance and additional information technologies so that production, distribution and consumption are better coordinated.
  • 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 the management and sorting capabilities of warehouses 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 own logistical activities.
  • Public policy. Public sector involvement in logistics remained indirect for a long period of time, mostly 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 the promotion of 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 become 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, often as landlords (setting of special public agencies), of comprehensive logistics projects. Trade and logistics were perceived to be of national interest and fundamental in 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 an enduring one, 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 the manufacturing aspect 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 took place along large port gateways that became more closely integrated with their hinterland with corridors connecting them to inland ports.
  • Activities. The industrial park, as a planned cluster of activities, 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 whole range of services and infrastructure supporting supply chains.