The New Logistics 4

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The New Logistics 4

  1. 1. Logistics Intensive Clusters<br />Yossi Sheffi<br />Elisha Gray II Professor of Engineering Systems, MIT<br />Director, MIT Center for Transportation and Logistics<br />Head, MIT Engineering Systems Division<br />
  2. 2. Clusters<br />Silicon Valley<br />Hollywood<br />Wall Street<br />Napa and Sonoma Valleys<br />“Bio-Cambridge”<br />2<br />
  3. 3. Literature<br />Alfred Marshal, Principles of Economics (1920): “Positive externalities of co-location.”<br />Knowledge sharing<br />Supply base<br />Labor pool<br />Michael Porter,Economics of Competition, Harvard Business review (1998)<br />Increased productivity<br />Increased pace of innovation<br />High pace of new business formation<br />3<br />
  4. 4. Types of Relationships<br />Customer<br />Company<br />Competitor<br />Complement<br />Supplier<br />4<br />
  5. 5. Types of Relationships<br />Customer<br />Company<br />Competitor<br />Complement<br />Supplier<br />5<br />
  6. 6. Economists are Asking:<br />Why cluster? Isn’t EDI, video-conferencing, visibility software, etc, enough for communications? (remember Tom Friedman?)<br />If this is not enough, why don’t companies in a cluster acquire each other more than we see?<br />6<br />
  7. 7. Why Clusters?<br />Trust<br />Tacit knowledge exchange<br />Collaboration<br />Research and education<br />Supply base/customer base<br />Are clusters an optimal point between slow behemoths with scale and nimble competitors with not enough resources? <br />7<br />
  8. 8. Logistics Clusters<br />Singapore<br />Holland<br />Zaragoza<br />Memphis<br />Louisville<br />Panama<br />Jolliet<br />8<br />
  9. 9. Logistics Clusters Classification<br />Modal orientation<br />Air (Memphis, Schiphol, Changi…)<br />Port (Rotterdam, LA/Long Beach, Singapore…)<br />Rail/Intermodal (Chicago, Dallas, Kansas City…)<br />Trucking <br />Scope-based<br />International<br />Regional<br />Urban distribution<br />Functional classification<br />FTZ/ Bonded/ Export processing<br />Single commodity logistics parks (food, electronics, chemicals…)<br />Special services (Haz Mat; Bulk distribution; Temp-controlled…)<br />9<br />
  10. 10. Success factors:Operational Advantages<br />Transportation:<br />Economies of scope (I/B – O/B; containers)<br />Economies of scale (capacity utilization; larger conveyances; direct LTL)<br />Economies of density<br />Economies of frequency<br />Resource sharing<br />Transportation capacity; warehouse space; equipment<br />Changing providers<br />Expansion capabilities<br />10<br />
  11. 11. Example: and <br />11<br />
  12. 12. Success factors:Natural Environment - Geography<br />Singapore<br />Holland<br />Zaragoza<br />Memphis<br />Panama<br />Chicago<br />12<br />
  13. 13. Independent, business-oriented management<br />Tax advantages (FTZ, tax deferments, bilateral trade agreements)<br />Other investments, educational institutions, business development<br />Support for cluster-wide IT applications<br />Success factors:Government and Regulations<br /><ul><li>Exporting a 20’ container takes:
  14. 14. In Kazakhastan: 93 days
  15. 15. In Mali: 67 days
  16. 16. In Sweden: 6 days
  17. 17. A typical export transaction requires:
  18. 18. In Democratic Republic of Congo: 42 approval signatures
  19. 19. In Nigeria: 39 approval signatures
  20. 20. In Australia, Austria, Canada: 2 approval signatures
  21. 21. In Germany: 1 approval signature</li></ul>13<br />
  22. 22. Independent, business-oriented management<br />Tax advantages (FTZ, tax deferments, bilateral trade agreements)<br />Other investments, educational institutions, business development<br />Support for cluster-wide IT applications<br />Success factors:Government and Regulations<br />World Bank’s Logistics Performance Index<br />14<br />
  23. 23. Value Added Activities<br />Postponement/customization<br />Return and repair<br />Outsourcing<br />Medical “rental”<br />Related competencies<br />Logistics clusters enable new multi-company offerings and operations<br />15<br />
  24. 24. Impact - <br />31.2 Million ft2 of distribution space (by 2008)<br />28,000 jobs were created in the park (in addition to the 1,710 construction jobs)<br />63,388 indirect jobs<br />total economic impact from 1990 through 2008 at $36.4 Billion<br />Investment: $387 million from public sources <br />Return:11% though 2008; 19% of current trends continue<br />16<br />
  25. 25. ?<br />Thank you<br />?<br />?<br />?<br />?<br />Yossi Sheffi<br />SHEFFI@MIT.EDU<br />17<br />

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