Global Production Networks

Global Production Networks

In a context of intense global competition and diminishing profit margins, logistics offer additional opportunities to improve the efficiency of production through distribution strategies. In this context, global production networks (GPNs) are accounting for an emerging and active branch of investigation of the various paradigms of globalization. While the term globalization implies many issues depending on the perspective considered, economic interdependencies in trade, production, and consumption – core elements of GPNs – are a major factor accounting for their dynamics. Global production networks have various configurations depending on the nature of their production and the markets they service. The term GPN itself is semantically very revealing:

  • Global. Relate to the underlying geography of the global economy. It considers space as a facilitator of economic efficiency, notably in terms of comparative advantages, but also as a constraint in terms of distance and market fragmentation. It expresses the locational reality of the global economy with differences in input costs and market potential.
  • Production. Relate to the variety of activities involved in the creation and transformation of resources, parts, and final goods. It expresses the value generation reality, both for goods and services, of the global economy with differences in manufacturing capabilities.
  • Networks. Relate to the complex web of interactions, both physical and immaterial (information), of production and its underlying logistics. It expresses the transactional and distribution reality of the global economy with differences in the efficiency of freight distribution.

GPNs are bound to the interactions between supply and demand, as they reconcile the requirements of the consumers (let it be an individual or a corporation) to have the right product, in the right quantity, at the right price, at the right location and at the right time, and the capacity of production and distribution systems to accommodate such requirements. The embeddedness they reflect is thus multidimensional, as markets, production, and distribution become more linked in a complex web of flows along value chains. The development of GPNs has to lead to a substantial growth in the flows of commodities, parts, and finished goods. In such a context, global freight transport systems have faced additional demands in absolute terms, but also in terms of the average distance goods are carried over.