Logistics Clusters: Delivering Value and Driving Growth Paperback – 3 Oct 2014
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"Yossi Sheffi's recognition of a select group of cities as logistics hubs, each with its own particularities, provides beneficial insight into new developments, business opportunities and services. His book stresses the dynamics and the different roles these trade hubs take on to serve the world; his detailed portrayal of each of the logistics hubs around the world and how he brings each case up to date is magnificent." -- Alberto Aleman Zubieta, Administrator/CEO, Panama Canal Authority "As much as anyone I know, Yossi Sheffi has advanced the cause of logistics as an academic discipline. I often call on him for his unique insight on how logistics intersects the worlds of technology, public policy, global trade, and other macro issues. In his book, he gives us an account of the broader impact as opportunities emerge and business models change because of the timing advantages that come from close access to air transport and overnight connections to most any place in the world." -- D. Scott Davis, CEO, UPS "Yossi Sheffi succinctly summarizes the major current developments in worldwide logistics in this well-written book." -- Frederick W. Smith, Chairman & CEO, FedEx Corporation "Logistics has become an essential part of competition and the modern global economy. Logistics clusters, in which sets of logistics activities co-locate and concentrate in particular locations, have emerged across the globe. Such clustering unlocks large positive externalities and economic growth in logistics while stimulating related economic diversification in logistically intensive fields. Yossi Sheffi's book provides a fascinating description of the power of clusters in services and the evolution of logistics clusters globally. This interesting book shows how clusters are getting more important in the global economy, not less, defying predictions of the end of geography." -- Michael E. Porter, Bishop William Lawrence University Professor, Harvard Business School "This book provides valuable insights for business leaders who are building their global and Asian supply chains. We are proud that renowned supply chain management expert Yossi Sheffi has highlighted Singapore as one of the successful logistics clusters alongside cities like Memphis, Chicago, Rotterdam, and Los Angeles. Based on solid research and practical examples, Sheffi's book offers a perceptive understanding of the roles governments, businesses, and academia can play to create an enabling environment for logistics clusters to thrive." -- Leo Yip, Chairman, Singapore Economic Development Board "An insightful book, with real world cases from all over the globe, that show the benefits of logistics clusters. An interesting read for logistics professionals and certainly for us at Port of Rotterdam Authority, who focus on developing a vital port cluster both in Rotterdam and in some selected emerging clusters around the world." -- Hans N.J. Smits, President and CEO, Port of Rotterdam Authority "Yossi Sheffi's lucid book reveals how logistics clusters enhance the productivity of global supply chains, promote trade, sustain economic growth, and create good jobs." --Klaus Schwab, Founder and Executive Chairman of the World Economic Forum "Yossi Sheffi has done a fabulous job of describing the role of the supply chain for our country and the rest of the world. The result is a new kind of development focused on logistics that is not only increasing the value and benefits of the supply chain, but lowering overall logistics costs, energy consumption and environmental emissions, while driving new capital investment and job-creating growth. Logistics Clusters is a must read for anyone interested in strengthening their competitive position in our national and global economies." -- Matthew K. Rose, Chairman & CEO, BNSF Railway Company --This text refers to the Hardcover edition.
About the Author
Yossi Sheffi is Elisha Gray II Professor of Engineering Systems at MIT and Director of the MIT Center for Transportation and Logistics. He has worked with leading manufacturers and logistics service providers around the world on supply chain issues and is an active entrepreneur, having founded or cofounded five successful companies since 1987. He is the author of T he Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage (MIT Press) and Urban Transportation Networks.
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One of the roles of distribution centers and freight yards is to match load sizes across different conveyances.
PLAZA is the largest logistics park in Europe. Larger parks allow lower and more stable transportation costs and a greater range of options. PLAZA started early and overbuilt at the start, creating an entry deterrence for possible competitive sites. Its size has also brought maintenance shops, hotels, and restaurants to the site.
Florentine artists were concentrated into an area that improved the interest in developing and spreading new techniques (eg. new painting techniques that took distance perspectives into account, developing new colors, firing techniques). The need to fund art work brought banks and development of double-entry bookkeeping. Originally those made rich from trade generated the interest in art work.
Silicon Valley early on attracted VC funders, in turn attracting more new ventures. Both Florence and Silicon Valley generated a life-long interest in learning and improved ability to provide it. Other well-known clusters include Route 128 near Boston, Hollywood, Toyota City, furniture in High Point N.C., and Wall Street. Increased innovation and formation of new businesses, increased trust among participants from being close to and knowing each other, knowledge spillovers (eg. to/from suppliers, programmers) and improved JIT capability are other advantages.
Downsides - clusters may overly encourage group-think (Akron and bias tires vs. radials; the Big Three vs. foreign manufacturers. They're also vulnerable if production goes overseas. The fraction of trans-shipments (in and immediately back out) reflects a terminal's importance and efficiency.
Mercantilism calls for maximizing exports via subsidies and minimizing imports via tariffs. The Dutch government, as early as 1598, saw the undesirability of intra-Dutch competition for Asian trade and encouraged major players to form a single trading company (Dutch East India Company) which was then given a 21-year monopoly on trade with Asia. Singapore thrives on trans-shipments. The Malacca straight creates a natural meeting place between East Asian economies and South Asian and Western merchants. (The latter via the Suez Canal.) Singapore's equatorial location also brings almost no extreme weather because it lacks the Coriolis effect of the Earth's rotation. This trade has made Singapore more cosmopolitan than Rotterdam.
The propensity for world trade is associated with cultural tolerance - Iberian Jews not prohibited by creed from lending or borrowing helped establish Amsterdam as a major financial center; Flemish printers, fleeing Catholic restrictions on publishing, made Holland a major center for knowledge and book printing.
Memphis as become a good FedEx hub because its location optimizes distances and flight schedules to/from East and West coasts. It also enjoys relatively mild weather.
Empty truck trips consume about 75% of the fuel of fully-loaded trips, and tire wear is worse. Bigger conveyances are more fuel and labor efficient. Fifty years ago truck trailers in the U.S. were 32 feet. Road trains in Australia reach a length of as much as 6 trailers. UPS now owns nothing smaller than a 757 (87,700 lb. capacity), while 747s carry up to 270,000 lbs. Barges are lashed together to form groups of 15 - 50. The first makeshift containers ship in 1956 held 58 containers, then 610 in 1960, 1,500 in 1969, 3,000 in 1972, 4,000 in 1981, 2006 the Emma Maersk could handle 14,000 20' container-units (TEU), and in 2011 it ordered 20 new 18,000 TEU ships from Korea's Daewoo. A trans-Pacific TEU on an 8,000 TEU ship costs about $200 less than on a 4,000 TEU ship. One gallon of fuel moves one ton of cargo 60 miels by truck (22 ton capacity), 202 miles by rail (100 tons/car), and 514 miles by barge (3.5 million tons).
Combined-load operations typically are scheduled more frequently then direct-operations. Large logistics clusters allow reducing the number of load/unload costs and delays. Large truckload carriers recently averaged 12 - 14% empty miles, with private fleets about twice that. A 747 freighter sitting idle can consume $1,500 - $2,000/hour in finance charges, plus parking space fees.
Co-location facilitates collaboration between major shippers - eg. S.C. Johnson and Energizer are now sharing trucks, allowing mixing dense and light loads.
Medtronic FedExes $120,000 spinal kits with all types of sizes of plates, rods, brackets, and screws to hospitals with elective surgeries. The hospitals then returns unused portions of the kit to Medtronic for inspection, replenishment, and re-cleaning. Repair and parts facilities locate near FedEx and UPS air hubs to provide fast service.
When UPS has overflow packages out of Singapore to Shenzhen, it sometimes uses airline freight space. Having multiple carriers co-located makes this easier.
Another opportunity - sharing workers via a contract logistics services provider. Excel operates 8 DCs in/around Alliance, Texas.
Logistics clusters allow postponement of product differentiation to a point closer to the time/place a product is sold - eg. prepackaging for promotions, adding sales tags and bar codes. Also improved JIT performance - eg. matching to varying production schedules, refurbishing returned goods (only 5% have true defects).
A ten ton truck axle creates over 1,000X as much pavement wear as a one ton car axle. The costs of the Chinese national expressway network are estimated at $240 billion, most are toll roads built and operated by private firms.
The book is full of examples regarding the characteristics and advantages of logistics clusters. Many examples are concerned with the clusters of Saragoza, Rotterdam, Panama, and Singapore. I particularly enjoyed the up-to-date figures that are presented throughout the book which might be of some interest for further readers. In this connection, by the end of the book the section NOTES provides a number of references that support the author's arguments. As a matter of information, Yossi Sheffi carried out an in-depth study as for logistics features of the above clusters.
On a cost x benefit analysis, the book is a must and should be kept on the bookshelf of everyone into the logistics area. I therafore strongly recommend purchasing the above book.
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