Fragmentation of the Production System and the Logistics Industry

The fragmentation of the production system to exploit the comparative advantages of different locations is on par with the development of the logistics industry. Conventionally, most production systems were regional in scale, benefiting from economies of agglomeration and specialization. A regional industrial system processed inputs (raw materials, parts, etc.) and produced outputs (finished goods), functions supported by a distribution system, often operated by the manufacturer. The emerging situation implies an increasing reliance on logistics to support a fragmented production system.