Major trade corridors

As we explored in the previous step, supply chains have become increasingly complicated, owing to the demand for complex problems.

Relating this to freight, a distinct issue in global logistics is the problem of directional balances. Freight tends to be moved one way and hardly ever goes back where it came from. Even a complex product made in stages often moves from one destination to another in today’s global supply chains.

This creates another problem within supply chains. The physical characteristics of the products change as they receive inputs and added components.

An ambient distribution network might have shipped raw materials for pharmaceutical products, but post-production the finished goods need to be hygienically handled and stored in temperature-controlled environment. That means storage and transport assets change. This causes the issue of what to do with empty vehicles and containers that need to be returned to their starting point.

Freight and transport operators in all modes must deal with the issue of directional imbalances, both on a national, regional and international scale.

Logistics providers need to have a clear understanding of which directions freight moves. It might appear that empty journey costs would make operating transport unprofitable. It can be a major risk, but most transport operators ensure that outbound journeys cover the full round-trip cost back to their base. A healthy back-load market exists from all destinations, whether national or international, where operators looking for return journeys can offer their vehicles to move goods at a reduced market rate.

A graph displaying Transport Equipment Utilisation on different trade routes. The graph illustrates there are great freight imbalances between Asia to Europe and Asia to the USA.

Click on the image to expand and zoom in.

As the above graph illustrates, there are great freight imbalances between Asia to Europe and Asia to the USA. From a transport equipment utilisation perspective, this causes a large number of empty movements of containers, ships, trains and road vehicles. Shippers of goods are aware of this problem and demand low freight costs to fill these empty journeys – if they can even find goods to go back to Asia. The graph highlights the low quantity of goods that travel back to Asia. Flows between Europe and the USA are mainly balanced.

Your task

What do you think could be done to further address the directional imbalances between Asia and Europe/USA? Discuss in the comments area.

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This article is from the free online course:

Principles of Global Logistics Management

Coventry University