value of access -manufacturing supply chainsvalue of access -manufacturing supply chains sharada...
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Value of Access -Manufacturing Supply
Chains
Sharada Vadali, Ph.D
Shailesh Chandra, Ph.D
1
April 10, 2014
CONTENTS
Introduction & Background
Measuring Access/Directness
Index Applications
Concluding Remarks
2
3
Introduction & Background-Value of
Manufacturing and Access
Figure 1. Buyer Supplier Network/Upstream Downstream Connections
12.5%
GDP
$3.2 trillion
spent on materials
Capital expenditures ($147 million)
85% on machinery,
parts
17.4 million employment
Source: Annual Survey of Manufacturing, 2012 National Association of Manufacturing
$1.32
approximate
multiplier
Production
costs
Economies of scale-
delivered prices
costs
4
Introduction & Background- Access, Supply
Chains and Productivity
Consumer/Buyer
Buyer’s Buyer 2
Buyer’s buyer 1 Supplier 1
Supplier 2
End User/Buyer
1/Final Market
End User/Buyer 2/Final
Market
End User/Buyer 3/Final
Market
Supplier’s Supplier 2
Supplier’s Supplier 1
Supplier’s Supplier 3
Supplier’s Supplier 4
Value Chain Local Spatial Manifestations: Supplier clusters and productivity implications Better access to a pool of employees, and suppliers Access to specialized market, technical, and competitive information Complementarities
Measuring Access (Within Supply Chains)
A Threshold-bound Buyer-Supplier Index (TBI)
1. Behavioral basis-Based on a threshold drive time around the given firm.
1. Single day drive
2. Just in time /just in sequence criteria
3. Other sourcing criteria
5
Threshold-free Index (TFI)
1. Over a region
All measures bound [0, 1]
Cover the broadest range of supplier markets: Labor, raw materials, parts, energy N
None of this is typically captured in traditional input-output models
𝐴1𝑖,𝑘 =
𝜂𝑖,𝑠𝑘 𝛼𝑖,𝑠𝑘
𝑆𝑖𝑘
𝑠=1+ 𝜂𝑖,𝑏
𝑘 𝛼𝑖,𝑏𝑘
𝐵𝑖𝑘
𝑏=1
𝜔𝑖,𝑠𝑘 𝛼𝑖,𝑠𝑘
𝑆𝑖𝑘
𝑠=1+ 𝜔𝑖,𝑏
𝑘 𝛼𝑖,𝑏𝑘
𝐵𝑖𝑘
𝑏=1
where
i = firm unit for which the index is to be calculated,
s and b are the respective supplier and buyer industries with 1,2,..., k
is S and 1,2,..., k
ib B
k
iS = number of direct suppliers to industry unit i belonging to type k
k
iB = number of buyers of industry unit i belonging to type k
,
k
i s = 1 if the supplier industry s of unit i belonging to type k is within the threshold drive time
through the shortest path transportation network, otherwise 0
,
k
i b = 1 if the buyer industry b of unit i belonging to type k is within the threshold drive time
through the shortest transportation network, otherwise 0
,
k
i s = 1 if the supplier industry s of unit i belonging to type k is within the threshold drive time
based on Euclidean travel time
,
k
i b = 1 if the buyer industry b of unit i belonging to type k is within the threshold drive time based
on Euclidean travel time
,
k
i s (or, ,
k
i b ) is the weight for travel or interaction between industry s (or i of type k) to industry
i (or b) of type k.
(I) Level -1: The Firm- Specific Industry Access Indicator ( ,
1
i kA ) for an firm unit 1,2,..., ki U
belonging to type industry sector 1,2,...,k K , is defined as follows:
Proximity: Threshold Bound Index (Level 1 Firm and
Level 2- Industry)
𝐴2𝑘 = 𝐴1
𝑖,𝑘
𝑈𝑘
𝑖=1
𝑈𝑘
(II) Level-2 TBI (2
kA ) for the industry type or sector k is given by:
where Uk is the total number of firms in the cluster sector.
Upstream Downstream
I) Level-1 Transport Accessibility Index ( ,
1
i kL ) for an industry unit 1,2,..., ki U
belonging to type 1,2,...,k K with Uk as the number of industry units is defined as,
𝐿1𝑖,𝑘 =
𝛼𝑖,𝑠𝑘
𝜏𝑖,𝑠𝑘
𝑆𝑖𝑘
𝑠=1
+ 𝛼𝑖,𝑏𝑘
𝜏𝑖,𝑏𝑘
𝐵𝑖𝑘
𝑏=1
𝛼𝑖,𝑠𝑘
∈𝑖,𝑠𝑘
𝑆𝑖𝑘
𝑠=1
+ 𝛼𝑖,𝑏𝑘
∈𝑖,𝑏𝑘
𝐵𝑖𝑘
𝑏=1
where
i = industry unit for which the index is to be calculated,
s and b are the respective supplier and buyer industries with 1,2,..., k
is S and 1,2,..., k
ib B
k
iS = number of direct suppliers to industry unit i belonging to type k
k
iB = number of buyers of industry unit i belonging to type k
,
k
i s = travel time via the shortest path network from supplier s to industry unit i of type k
,
k
i b = travel time via the shortest path network from industry unit i of type k to buyer b
,
k
i s = travel time from supplier s to industry unit i of type k, using Euclidean distance
,
k
i b = travel time from industry unit i of type k, to buyer b using Euclidean distance
7
Proximity(Contd.): Threshold Free Index (Level 1
Firm and Level 2- Industry (Gravity Formulation)
𝐿2𝑘 = 𝐿1
𝑖,𝑘
𝑈𝑘
𝑖=1
𝑈𝑘
II) Level-2 TFI (2
kL ) for the industry type k
where Uk is the total number of firms in the cluster sector.
Practical Applications of Measures
Influence of transport networks in influencing business
connectivity
New or improved links and associated impacts on transport costs, reliability and speed
Connections to input markets OR downstream bottlenecks in getting goods to markets
8
Analyzing and understanding freight flows
Non-transportation applications like workforce access, economic development applications
Automotive Suppliers
(Total 40 for Mercedes- Benz USA LLC and
38 for Honda Manufacturing of Alabama)
Cities as
Retail Markets
(Total 60)
OEM Assembly Plant
(Total 2, Mercedes- Benz USA LLC and Honda
Manufacturing of Alabama)
(Stage 1)
(Stage 2)
Wholesale Trade Markets
(Total 341)
(Stage 3)
9 Evaluation Example: Automobile Industry Chain
Alabama, US
Stage 2/3
Buyer-
Supplier
Access Indices
Mercedes- Benz USA LLC
Honda Manufacturing
2002 2010 2002 2010
Level -1 TBI
(With Supplier
(S)-Buyer (B)
percentage
increase/decrease)
0.39 0.41 0.27 0.36
S (upstream) =
+9.3%,
B (downstream) = +0.9%)
S = +31%, B = +39%
Level -2 TBI 0.33 0.38
10
Evaluation of a Corridor Improvement- TBI
(Levels 1 and 2)- 120 m JIT supplier
threshold(OEM Plants as buyers) (2002-2010)
11 Concluding Remarks- Indices are….
Generic and allow the possibilities for extension to multi-modal
networks and subsequently broader geography.
Geography of final demand
Geography of inputs- supplier markets
Applied to a transport project evaluation exercise for 2 local
chains (Mercedes; Honda, Al).
Project level connectivities influence both positively (local chains
benefit), but reveal differences in how individual chains may be
affected.
Can be part of a proactive transportation planning strategy
and economic development strategy in areas where
manufacturing chains exist
Concluding Remarks…
Generic for any manufacturing industry type and the
markets they represent for enabling agglomeration
effects within the value chain
Link to inputs in a production process y= f(k, l, e, m, R&D)
12
Manufacturing Sectors
Innovation and R&D instensive
Labor intensive
Energy intensive
Regional processing
Challenges and Opportunities
Integration into planning
Data
Geography and scale
Potential adaptation of Web Tag Guidance on
agglomeration considerations via the effective
density metric (UK).
In the US, the TTI developed two sets of tools under SHRP2-
C11 (2012).
Specialized labor and/or input markets
Effective density (zonal measure-gravity formulation).
13
14
Thank You
1. Vadali, S and S. Chandra. Buyer-Supplier Transport Access Measures for
Industry Clusters, Journal of Applied Research and Technology, 2014.
2. Vadali, S and S. Chandra. Supply-Chain Consistent Access Measures for
Mega Region Economic Development. Transportation Research Record,
2014.
3. Texas A&M Transportation Institute—SHRP2-C11 Market Access Tools
(Vadali, S and S, Chandra, 2012) in Collaboration with G. Weisbrod,
A.Winston et.al. (2012).