the new logistics 4
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Logistics Intensive Clusters
Yossi SheffiElisha Gray II Professor of Engineering Systems, MIT
Director, MIT Center for Transportation and Logistics
Head, MIT Engineering Systems Division
Clusters
Silicon Valley Hollywood Wall Street Napa and Sonoma Valleys “Bio-Cambridge”
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Literature
Alfred Marshal, Principles of Economics (1920): “Positive externalities of co-location.”1. Knowledge sharing
2. Supply base
3. Labor pool Michael Porter, Economics of Competition,
Harvard Business review (1998)1. Increased productivity
2. Increased pace of innovation
3. High pace of new business formation
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Types of Relationships
Company
Supplier
Customer
CompetitorComplement
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Types of Relationships
Company
Supplier
Customer
CompetitorComplement
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Economists are Asking:
1. Why cluster? Isn’t EDI, video-conferencing, visibility software, etc, enough for communications? (remember Tom Friedman?)
2. If this is not enough, why don’t companies in a cluster acquire each other more than we see?
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Why Clusters?
Trust Tacit knowledge exchange Collaboration Research and education Supply base/customer base
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Are clusters an optimal point between slow behemoths with scale and nimble competitors with not enough resources?
Logistics Clusters Singapore Holland Zaragoza Memphis Louisville Panama Jolliet
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Logistics Clusters Classification Modal orientation
Air (Memphis, Schiphol, Changi…) Port (Rotterdam, LA/Long Beach, Singapore…) Rail/Intermodal (Chicago, Dallas, Kansas City…) Trucking
Scope-based International Regional Urban distribution
Functional classification FTZ/ Bonded/ Export processing Single commodity logistics parks (food, electronics, chemicals…) Special services (Haz Mat; Bulk distribution; Temp-controlled…)
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Transportation: Economies of scope (I/B – O/B; containers) Economies of scale (capacity utilization; larger
conveyances; direct LTL) Economies of density Economies of frequency
Resource sharing Transportation capacity; warehouse space;
equipment Changing providers Expansion capabilities
Success factors:
Operational Advantages
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Example: and
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Success factors:
Natural Environment - Geography
Singapore Holland Zaragoza Memphis Panama Chicago
BradaLP
Venlo LP
Brabant LP
Memphis
Panama Canal
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Independent, business-oriented management
Tax advantages (FTZ, tax deferments, bilateral trade agreements)
Other investments, educational institutions, business development
Support for cluster-wide IT applications
Success factors:
Government and Regulations
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Exporting a 20’ container takes: In Kazakhastan: 93 days In Mali: 67 days In Sweden: 6 days
A typical export transaction requires: In Democratic Republic of Congo: 42 approval signatures In Nigeria: 39 approval signatures In Australia, Austria, Canada: 2 approval signatures In Germany: 1 approval signature
Independent, business-oriented management
Tax advantages (FTZ, tax deferments, bilateral trade agreements)
Other investments, educational institutions, business development
Support for cluster-wide IT applications
Success factors:
Government and Regulations
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World Bank’s Logistics Performance Index
Value Added Activities
Postponement/customization Return and repair Outsourcing Medical “rental” Related competencies
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Logistics clusters enable new multi-company offerings and operations
Impact -
31.2 Million ft2 of distribution space (by 2008)
28,000 jobs were created in the park (in addition to the 1,710 construction jobs)
63,388 indirect jobs total economic impact from 1990 through
2008 at $36.4 Billion Investment: $387 million from public
sources
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
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Northwest ISDKeller ISDTarrant CountyDenton CountyCity of RoanokeCity of HasletCity of Fort Worth
Return:11% though 2008; 19% of current trends continue
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