How the cloud makes central planning a reality

Imagine the delivery of the hairdryer you ordered 18 hours ago was planned in a center 5,000 kilometres away – roughly the distance between Warsaw in Poland and Kashgar in China. Impossible? In fact, this is not a far-fetched fiction but soon to come reality.

Since the 1980s, the personal computer has helped businesses to plan and control many activities locally – from sending mass mailings to local customers to the managing of inventories and orders. The decentralized planning has helped to make products cheaper and more adapted to the local situation. For example the Spanish subsidiary of a global transportation company has replaced the 9am global service by a 10am local delivery option, as more people are expected to be in the office at that time. However, these local advantages pose major challenges to the international standards multinational customers expect from global brands. Therefore, global brands require central planning and control, which is back on the agenda – thanks to the internet and the cloud.

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How can the cloud bring the planning back to the center? While the personal computer helped create enormous efficiencies in almost each and every unit of a business, the cloud will surpass its abilities and ease the work of those charged with ensuring global standards and organisational efficiencies. The cloud is the place where all relevant data, information and applications can be stored available for all – locally and at the center – who have the necessary access rights. With easy to access storage capacity provided by providers like Amazon and IBM, the cloud offers an almost unlimited range of tools and databases – not only to the large but also to the small and mid-sized enterprises. This brings enormous advantages to the world of the so-called global supply chain.

It is the supply chain bringing the goods, ranging from food and medicines to the above mentioned hairdryers, to the supermarkets and stores, as well as everything that is needed to factories and other businesses and organizations. Thanks to the road and rail systems, water ways and air corridors, bilateral and multilateral trade agreements, this chain of continuous flows spans across borders and continents, cuts across international manufacturing networks and multiple distribution hubs and centres.

Today materials and parts are treated and transformed – in various stages and different locations on the globe – into an unprecedented variety of products. These goods are delivered globally, whether to consumers in the metropolitan areas like New York and Mumbai or to factories in the South African city of Uitenhage and in the province of Bac Ninh in Vietnam. This highly proliferated, and at the same time dense, global labyrinth of flow of goods is also exposed to many potential risks and disruptions.

The more precisely this supply chain is understood, i.e. described, analysed and planned, the higher the chance of smooth delivery and proper responses to market dynamics and unexpected shocks. Although the cloud allows the collection of data from stations, customers and situations all over the world, whether in the most distant corner of sub-Saharan Africa, the tip of South America or the tiniest island in the Philippines, only a central team closely collaborating with the country organisations might be capable of capturing the trends, threats and opportunities to determine quickly the most appropriate response.

How does the central way of supply chain planning and management work in practice? Each time when, for example, delivery plans are needed, the order requirements for customers are uploaded to the cloud. There, a powerful computing unit, utilising multiple parallel processors – called the optimisation engine – generates delivery plans satisfying the many constraints imposed by weather and climate, geographic and traffic situation, as well as the delivery location, which could be on the 45th floor in a high rise in Hong Kong or at a tiny farm on an island in Indonesia.

The optimisation engine evaluates alternative ways of transport and determines the best options for delivery. These optimized plans are then transferred to computers or tablets at decentralised warehouses where the orders are loaded to reach the buyers by road, boat or planes. In real-time and constantly the data about the moving of these goods can be collected and analysed to preserve the highest level of central control and chance of an on-time delivery. Furthermore, all data and analysis – including information about the status of production in the factories of possibly thousands of suppliers, as well as the actuals versus the sales plans of the many employed or serviced third-party sales teams – can represent valuable input for upcoming planning cycles.

The benefits of central planning are more than obvious: compliance with global standards, better forecasting, cost and carbon optimized routes, reduced hiring and training costs, and higher customer satisfaction and lower recovery costs through better quality control and more appropriate and timely responses to irregularities and disruptions.

Therefore, the next revolution in the supply chain will be the central orchestration team which collaborates closely across entire organisations to establish full visibility and ensure well informed decision-making. Applying predictive analytics and artificial intelligence will enable manufacturers, traders and logistics companies to receive clear predictions in respect to potential disruptions and even more so recommendations to store hairdryers at specific quantities and the perfect location – possibly long before we even thought about placing the order 18 hours ago.

This blog was originally posted on the World Economic Forum Agenda.

Hurdles ahead along the “New Silk Road”

In October 2012, Wang Jisi – professor at Beijing University – urged China to re-open its ancient commercial trade routes with the West. In 2013, China’s President, Xi Jinping proposed to its neighbors the “One Road, One Belt” initiative. China’s aim? To achieve $2.5tn in additional annual trade with the nations along the proposed routes over the next 10 years.

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What is the current state of the project and how likely is it to succeed?

The private sector, for one, has started reinforcing the connectivity between the East and the West. In 2011, supply chain operator DB Schenker started weekly trains between China and Germany. It carried 40,000 TEU containers (20 foot equivalent unit) from 2012 to 2014.

In 2015, the Port of Rotterdam welcomed its first containers by rail from China. This route shortens the delivery time of goods from around 60 days by sea to about 14 days by land. In the future, trains from Chongqing in China to Duisburg in Germany transiting 10,800 km (6,700 miles) are expected to reduce delivery time to 10 days. Companies such as Hewlett Packard are connecting European customers with the factories in China through the new route. Returning containers are filled, for example, with western luxury cars.

The result is that the modern caravan has started rolling. Thus, the “New Silk Road” development project – which embraces an area that is home to about 70 per cent of the world’s population, produces about 55 per cent of global GDP and has about 75 per cent of known energy reserves – has been taken its first steps. Of course, challenges remain.

The ambition requires efficient and effective collaboration between the 40 countries located alongside the historic silk routes, both those that went overland from China to Europe and those that went by sea. China has taken the initiative to start aligning the participants, signing partnership agreements related to the initiative from 2013 onward with Russia, Kazakhstan and Belarus.

The project requires significant funding – an estimated $8tn between 2010 and 2020 alone. The China government announced several commitments including a $40bn Silk Road Fund to be focused on projects in the Central Asia region, a $50bn Asian Infrastructure Investment Bank (AIIB) and a $10bn BRICS-led New Development Bank. Some sources suggest that Beijing is prepared to support the projects to the tune of between $160bn to $300bn. The China Development Bank and the Maritime Silk Road Bank are set to reinforce such support.

The New Silk Road project needs to overcome technical and regulatory challenges. The trains require at least two changes of gauge – as China and Europe use the standard of 1435 mm gauge while Belarus, Russia, Mongolia and Kazakhstan use the broad gauge of 1520 mm. Many borders need to be crossed. Customs clearance processes need to be standardised – advanced information technology and digitisation might help. Ideally, the New Silk Road will become a free-trade corridor.

Each country needs to understand what to contribute, such as what infrastructure and policies to launch, how to finance the initiative and what benefits to be expected from the investments. A well-designed business model which features a plan outlining how the Silk Road will work is critical to ensure that additional value – new businesses, new industries and new jobs – is created along the entire value chain and not merely at both ends (China and Europe).

Imbalances in economic strength and the flows of goods – China exports are traditionally stronger than those of most of its trading partners – and seasonality like slow months and peaks need to be factored in the model.

The success of the New Silk Road depends as well on clear governance rules and mechanisms. This includes the answer to the question of whether this project requires an independent organisation or can handle strategic decision-making and dispute resolution in a bilateral or multilateral way.

The incentive to get this right is huge. The participating countries will be able to tap in a new source of growth and need to balance spending with progress. Currently, China is carrying the lion share of the investment. In return, Asia’s leading economy expects significant stimulus for its market and favourable ties with countries along the belt.

The private sector will leverage the potential and increase investments proportional with the improvements in infrastructure and processes. If successful, the reboot of the ancient Silk Road will without doubt bring additional growth opportunities to business and nations, and provide also better access to no less than 66 per cent of the world’s middle class, which is expected to live in China by 2030.

Other sources:
ECFR. (2015). One Belt, One Road: China’s Great Leap Outward. European Council on Foreign Affairs

This article was first published in The Financial Times.

Author: Wolfgang Lehmacher is head of supply chain and transport industry at the World Economic Forum. Victor Padilla-Taylor is community lead, supply chain and transport at the World Economic Forum.

Image: Kayakers take in the last of the day’s light as they paddle past a ship anchored off Cape Town. REUTERS/Mike Hutchings.

What happens when household appliances go shopping?

Running out of coffee or razors can be frustrating. Throwing away expired medicines and food too. Managing inventory of all kinds even in the smallest of households is an art perfected by few. Monthly subscriptions for deliveries on a regular basis offer some support. With 5 billion connected “things” in 2015 there should however be better solutions to make empty stocks and out of date products a thing of the past.

Today’s internet connects the world: buyers with sellers, smart devices like tablets and phones with the mushrooming online shops. At the same time, household appliances are becoming increasingly connected and more and more equipped with sensors to provide a broad range of information to users and other parties. For example, a prototype of a smart reusable milk cap that uses sensors to detect when milk starts to go bad was recently created by researchers at the University of California-Berkeley.

Meanwhile, wouldn’t it be great if sensors and smart appliances helped us replenish our groceries? This is not as far-fetched as it seems.

One important step towards auto-replenishment is Amazon’s Dash Button, launched on April 1 2015. Once pushed, the ‘Button’ – attached to appliances around the home – processes automatic refill orders and delivery requests. Each time the button is pressed, an alert is sent to the mobile phone connected to the account and, once the order is approved, detergents, coffee filters and other essential articles are soon after delivered to our home – some even within the hour.

More importantly, alongside the Button, the Dash Direct Replenishing System was launched as well. This service provides an API (Application Program Interface) – a specification which allows smart devices to communicate with each other. The API enables manufacturers to directly integrate the Dash system into appliances – bypassing the Button. Without any action on your part, your espresso machine might soon know when and where to place the order when the stock is low. No more frustrations, no more time to waste for writing the purchasing list for our day-to-day products.

The replenishment services are not only for our homes. Any business and organization can benefit from this development and companies can design new offerings. Xerox, for example, has identified that the most common reason people can’t print is that the printer has run out of toner. Therefore the company has launched an auto supplies replenishment service for printers.

The new replenishment services – whether for homes or organisations – will save space and time, stocks and money – and by avoiding waste from outdated products the development is good for the planet too. The only missing piece seems to be the app to align and combine the orders to reduce the number of deliveries, and consequently energy consumption and emissions. This all is probably only the beginning of a massive development of new services driven by connected devices and the capabilities offered by the internet. What if household appliances not only booked the orders for their refills but also the spare parts in the case of a breakdown and also notified the nearest repairman too?

With this new level of convenience comes new requirements and risks. Today’s supply chains are hardly prepared for the developments resulting from the highly interconnected world. The frequency and speed of the supply chain in delivering goods to organisations and more importantly our homes will be critical. Same day delivery for essential products will become the norm.

Of course, everything connected to the internet can be hacked. After two hackers were able to take control of a Jeep over the internet, 1.4 million vehicles needed to be recalled. In the hyper-connected world our security is at stake, both at home and in the workplace. The risk lies not only in the possibility that hackers take control of devices but also in the data gathered by the devices – may it be sensitive personal information or, for example, the secret research data of a company.

According to experts, part of the problem is that it is very difficult, if not impossible, to write a secure code. While devices like the Dash Button might not pose a direct risk, the fact that “things” communicate with each other through the internet create billions of potential backdoors into our homes and organisations as well as all possible places surrounding us – for example into the doctor’s practice or the tram we are using to get to work in the morning. The route towards tomorrow’s world of increased convenience and efficiency needs to be explored and with the respective precautions to be taken, not only by individuals but also companies, in particular the manufacturers of the smart devices.

What will the future of the highly connected world look like? Will we see bright and colourful branded buttons on appliances everywhere in our homes, companies and other organisations? Probably not. The likely mainstream scenario is the gradual increase of the number of connected “things” controlled by smartphones, tablets, and wearables acting more and more autonomously. The Apple HomeKit is an indication of the type of frameworks required to control this connected world of partially autonomous appliances and, moreover, the Kit might be one of tomorrow’s most stylish housekeepers.

This blog was originally posted on the World Economic Forum Agenda.

Image: An internet-enabled Dacor Discovery gas range and electric oven is pictured during the 2015 International Consumer Electronics Show (CES) in Las Vegas, Nevada January 4, 2015. REUTERS/Steve Marcus

How smart packaging can save lives

Can something as simple as proper packaging save lives? The reverse is certainly true.

The World Health Organization recommends that tetanus vaccines are stored in temperatures from 2-8°C, otherwise the vaccine might become not only unusable, but a health hazard. In areas where there is vast supply, losing a shipment is not the end of the world; however, a sudden disaster can lead to no supply, and the worst possible scenario: the loss of lives.

But that worst-case scenario is set to become a risk of the past. Newly commercialized methods of Smart Packagingpackaging allow for temperature stability for up to five days, overcoming probably more than 90% of disruptions in supply. The highest level of security can be obtained through the wonder of modern technology called the Internet of Things. The little pack of medicines, hidden deep in the air cargo pallet, can now send data to doctors in Kampala, telling them how warm or cold it is in the transit warehouse, and how long it has been stuck at the airport in Addis Ababa.

Consider the following real life example: During transit of a thermal pallet shipper, Henry Schein Inc. – the world’s largest provider of healthcare products and services to office-based dental, animal health and medical practitioners – was experiencing significant customs delays at a location in the Middle East. The important shipment of vaccines, diagnostics and antibiotics was at risk to become waste, and lost to those expecting and needing the supplies. However, the data provided by web-based technology alarmed Henry Schein that the packaging was reaching its thermal limits. Through close collaboration with the transportation partner the required reconditioning prior to delivery to customers was ensured, all occurring without any damage. Smart packaging prevented this shipment from spoiling in transit, which would have caused significant shortages of medical supplies to the areas of need.

Security packaging with anti-counterfeiting technologies plays also a vital role in fighting the $200 billion counterfeit drug industry. Smart packing will alleviate health risks associated with adulterated drugs, the catch-all term for contaminated, unsterile, unsafe, spoiled or expired products. According to a study published by The Lancet on 2,634 malaria drug samples, more than one-third failed as substandard after chemical analysis, and about 20% were found to be wholly counterfeit. Today’s packaging design goes far beyond material quality but helps to focus on improved barrier properties to moisture, UV light, oxygen, shock and carbon dioxide.

The world of connected and communicating things offers unprecedented perspectives into life protection and healthcare. Ultimately, packing will carry all vital information, ranging from the evidence that the product is genuine, to the conditions the goods experienced during the sometimes very long journey from the factory to patients and users.

This will not be the end, however, of the development. Increasingly popular wearables in the form of smart watches, glasses and even textiles will not only be able to receive and analyse the data sent by the smart packages, but produce and communicate individual information, which at some point will allow for individualized drugs and treatments.

This blog was originally posted on the World Economic Forum Agenda.

Author: Wolfgang Lehmacher is Director, Head of Supply Chain and Transport, Mobility Industries at the World Economic Forum.

Image: Various medicine pills in their original packaging are seen in Ljubljana REUTERS/Srdjan Zivulovic

How the internet is globalizing small and mid-sized enterprises

In 2012, then University of Washington student, Ryan French invented an easy way to connect a smartphone to a games console controller and hold both devices at once. He Internetcalled it the Gamekilp. Thanks to online sales and payments Ryan has sold the product to customers in more than 80 countries. Internet-based marketing made the business instantly global and Ryan states, “I can’t imagine something like the GameKlip being successful without online sales and payments, I never considered launching only in the domestic market. Around half of GameKlips are purchased from outside the US, with Canada, the UK, Australia and Germany proving the biggest markets so far.”[1]

What are the specific drivers behind Ryan’s success? The primary driver for the success of the Gameklip is the global Internet, which enables a small entrepreneurial business like Ryan’s to connect directly with 3 billion potential customers around the world. The second driver is online platforms like web marketing and electronic payments processors that enable Ryan to find and engage in trusted transactions with customers from around the world. The third driver is global express shipping services, which enable Ryan to deliver the Gameklip to customers around the world safely and securely.

The primary key benefit of the Internet-based model for cross border commerce are the low barriers to global market entry. Thanks to online platforms, Ryan could setup his website, market the product, accept payments, and deliver all without large scale capital investments or an international sales team and organisation. Another key benefit of Internet-enabled cross border trade is the ability to rapidly scale globally. Ryan put up his website and within the matter of a year had sold to 80 countries.

Innovative software that can calculate fully-landed costs upfront are a major enabler. The ebay.com Global Shipping Program is an example for an enabler of cross border trade. The program makes products located in the United States of America and the United Kingdom available to buyers around the world. There are three elements which are key to the success of the program. Firstly, the global eBay Marketplace platform with over 150 million users. Secondly, the partnership between eBay and Pitney Bowes. Thirdly, the creation of national logistics hubs where outbound international shipments can be aggregated and prepared for global shipping and distribution.

Is the regulatory framework ready for this development? Global public policy officials need to recognize that this type of trade is vital for healthy and inclusive economic growth, and that it has unique barriers associated with it. Ryan is not a known trader that can secure expedited treatment through customs for his goods. Ryan’s goods can be held up at borders and he would have no recourse because he does not have a dedicated customs agent to help facilitate the goods across borders. Specific policies are needed to support the small global entrepreneurs and the small and mid-sized enterprises.

Today, the Internet connects millions of entrepreneurs with billions of buyers. We are not surprised anymore about billion dollar businesses born in dorm rooms or garages. But the hidden stories that might be even more important in the long run are the countless micro-businesses that could survive and thrive in the technology-enabled global market that would have otherwise withered and died in the traditional 20th-Century model of globalization.

This blog was originally posted on the World Economic Forum Agenda.

Author: Brian Bieron, Executive Director, eBay Inc. Public Policy Lab. Wolfgang Lehmacher, Director, Head of Supply Chain and Transport Industries, World Economic Forum.

Image: A zoomed image of a computer monitor shows a website selling button clipart for online shops in Vienna November 27, 2013. REUTERS/Heinz-Peter Bader

[1] PayPal (2013) Modern Spice Routes – The Cultural Impact and Economic Opportunity of Cross-Border Shopping

Crowd-shipping: The next big thing in the sharing economy?

I can well imagine that crowd-shipping opens up new ways to respond to the needs and wants of the future consumer, in particular in the area of delivering goods bought online.

The sharing economy enables new ways of transportation by connecting those who need Crowdshippingparcel deliveries with those who are on the road. The main drivers of so called “crowd-shipping” are the rapid growth in online retailing, the desire to find new ways of overcoming the traditional problems of ‘last mile’ delivery and increasing interest, in some socio-economic groups, in supplementing earnings with casual work. Global B2C online sales are expected to grow from $1 trillion in 2012 to around $2.4 trillion by 2017. In China alone the number of packages transported by express delivery surged by 820% in the six years ending 2014. Across the globe capacity of ‘last mile’ delivery systems will have to expand enormously to cope with the expected volume growth.

Companies providing online platforms for crowd-shipping differ in their market focus, although the described way of operating is similar. Some platforms cater more for professional couriers: for example, it is estimated that, ‘at Zipments 95% of couriers are professional delivery folks with more than four years of experience’. Others like Rideshare, MyWay and Shippies rely on ordinary people. Deliv tends to specialize in deliveries from shopping malls of products that were either bought there or purchased online on a ‘click and collect’ basis.

The legacy of the financial crisis in many countries has forced a lot of people to search for new ways of generating extra income or subsidising their travel costs. Crowd-shipping allows us to carry and deliver parcels at highly attractive prices with low incremental burden on the environment, by people who can earn some extra money and, possibly, the satisfaction of supporting their local neighbourhood.

This blog was originally posted on the World Economic Forum Agenda.

Author: Professor Alan McKinnon, Professor and Head of Logistics at Kühne Logistics University, Germany. Chair of the World Economic Forum’s Global Agenda Council on Logistics & Supply Chains. Wolfgang Lehmacher, Director, Head of Supply Chain and Transport, Mobility Industries, World Economic Forum.

Image: A worker loads packages onto a bicycle as he prepares to deliver them in central Beijing, December 22, 2011. REUTERS/Staff

How Brazil could unlock $84 billion in trade growth

I strongly believe that improving exports starts by clearly understanding which industries hold the biggest potential for improvement and which supply chain barriers should be prioritized.

Brazil’s annual trade growth exceeded 10% over the past two decades, but last year it dropped by 7%. The nation’s economy clearly has stalled, with GDP rising by only 0.1% in 2014. Getting the economy back on the right track may not be easy, but one major solution is to eliminate the key obstacles that limit exports in the industries with the greatest potential for improvement. This has been outlined in the recent World Economic Forum report on Enabling Trade in Brazil.

One step toward improving the situation is to reduce the cost to export. In 2014 it cost an average of more than  $2300 to ship a container from Brazil. That is 21% higher than the Brazil Tradecost of a similar container in South Asia and 5.5% higher than sub-Saharan Africa. Brazil can increase its participation in global value chains by reducing this and other hurdles to trade, such as streamlining the administrative processes that slow the flow of goods. Bringing just two key supply chain barriers – border administration and transport and communications infrastructure– even halfway to the world’s best practices could unlock $84 billion in Brazil.

We group the main barriers for trade in four dimensions: market access, border administration, infrastructure and business environment.

Brazil’s automotive industry could save $ 110 million in the cost of importing components used in the automotive manufacturing process if it reaches international cost benchmarks. Lowering those import costs would make it more competitive for companies to build cars for export given a portion of the imported components are used in the exported cars. In the re-export process, the government has provided companies with tax exemptions, but the process to obtain those exemptions is still complex, with too much detail required from companies and too many controls.

Automotive companies also would be better positioned to boost exports with clearer and faster import licensing procedures, – allowing them to operate with reduced inventory levels. Brazil could improve its competitiveness by more aggressively investing in new port terminals that make it faster and cheaper to export. Despite some improvement in the quality of services, logistics costs are high compared with many other countries. Finally, Brazil could benefit by establishing more bilateral agreements with other countries for automotive industry exports.

The same issues that inhibit exports in the automotive industry limit expansion in other sectors, too. As the second largest soy exporter in the world, Brazil has the potential to unlock more exports, through the removal of some bottlenecks in inland transportation that turn some soy areas in Brazil less competitive than the United States.

In a country the size of Brazil, the most efficient and effective way to spur exports will be to view trade barriers across the end-to-end value chain in the most important industries, and then tackle those barriers to make the industry competitive. Improving those particular industries sets the stage for improvements in others.

This blog was originally posted on the World Economic Forum Agenda.

Authors: Fernando Martins is Senior Partner with Bain & Company. Wolfgang Lehmacher is Head of Supply Chain and Transport Industries at the World Economic Forum.

Image: Baskets containing acai berries sit on the dock near the boats that brought them to Ver-o-Peso market in Belem January 11, 2012. REUTERS/Paulo Santos

Innovation in Home Health and Medical Care Logistics

The world’s growing elderly population and the general interest of the world’s population in health and medical care represents a major new market for entrepreneurial transportation and logistics managers as policy makers look to expand home care solutions.

On 22 February 2013, I have published in the Journal of Commerce covering the same topic with the title Medical Logistics Offers Opportunities for 3PLs.

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Logistics companies have huge opportunities to benefit from home care, from the results of the rising age of the world’s population and the increasing needs and interest in the matter as a whole. The strain health treatment will place on public services in the years ahead will see both developed and developing countries increasingly turn to home care options as they seek ways of coping with accelerating demand for health and medical care.

Holistic approaches to home health and medical care with logistics services at their core will give governments and citizens a whole new and more convenient and cost effective way of managing demand for health and medical care in the future. Processes and services can be tailored to specific customer segments to make them as smart as possible through the use of technology.

Working together, transportation, technology, security companies and logistics businesses can partner with nurse networks, pharmacies and hospitals to provide viable methods of caring for the citizens. The opportunities for logistics companies to make themselves critical to the delivery and monitoring of such services are immense and already being developed.

Over 80 percent of the world’s elderly population will live in developing countries by 2050, according to a new report by UNFPA, the United Nations Population Fund, and HelpAge International.

Ageing in the Twenty-first Century: A Celebration and a Challenge found that the number of elderly persons is growing faster than any other age group. The report said the trend represented a huge challenge and would require completely new approaches to health care, retirement, living arrangements and intergenerational relations.

In 2000, for the first time in history, there were more people over 60 than children below the age of 5. By 2050, the elderly generation will be larger than the under-15 population. In just 10 years, the number of elderly persons will surpass 1 billion people—an increase of close to 200 million people over the decade. Today two out of three people aged 60 or over live in developing countries. By 2050, this will rise to nearly four in five.

“If not addressed promptly, the consequences of these issues are likely to take unprepared countries by surprise,” said the report. “In many developing countries with large populations of young people, for example, the challenge is that governments have not put policies and practices in place to support their current older populations or made enough preparations for 2050.”

However, the opportunity in the health and medical care sector goes far beyond the segment of the elderly and expands into the way we monitor the health conditions of the entire population. General health checks in adults for reducing morbidity and mortality from disease (Review) published by The Cochrane Collaboration states that “General health checks did not reduce morbidity or mortality, neither overall nor for cardiovascular or cancer causes, although the number of new diagnoses was increased. Important harmful outcomes, such as the number of follow-up diagnostic procedures or short term psychological effects, were often not studied or reported and many trials had methodological problems. With the large number of participants and deaths included, the long follow-up periods used, and considering that cardiovascular and cancer mortality were not reduced, general health checks are unlikely to be beneficial.”

What this report indicates is that comparison with the national or international average relative to the health care parameters, for example blood pressure, doesn’t mean anything to anyone and what matters most is the comparison with the health care tracking data of each individual against the own record.

Therefore, the market should not be segmented along age-brackets. We need to understand the needs in respect to health and medical care across the entire population and segment accordingly.

Home health and medical care solutions can be divided into three components – Monitoring and Examination, Vital Sign Check and Medical Treatment.

The ‘Monitoring and Examination’ process such as providing a sample for analysis would take in a number of stages with a logistics component such as delivery of test kits from agencies to the citizen and the return of the sample to the agency. Having obtained the sample analysis, this data would then need to be delivered to medical institutions and follow-up could involve the delivery of a suitable treatment to the individual.

Taking a ‘Vital Sign Check’ of a person could mean delivering medical equipment and software from manufacturers to individuals and managing the data received from home and its online delivery and analysis.

‘Medical Treatment’ services might incorporate diagnosis, treatment, medication and food delivery. This process could see diagnosis and some treatment by remote communication systems, with wholesalers or retailers requiring the delivery of drugs or food directly to individuals at home.

Although such treatments would involve a whole range of companies – from equipment and pharmaceutical suppliers to telecommunications and catering experts – transportation and logistics will be crucial to the whole value chain.

Best practices for the potential roll-out of home care solutions have already been identified with a major logistics component for Japanese distributors looking at their provision in Japan and in emerging markets. The model developed sees logistics companies take responsibility for the home delivery of equipment needed for vital sign checks, various other test kits, home security devices and a range of medical and communication equipment.

The handling of samples such as blood and sensitive drugs, for example, must be carefully managed with guaranteed temperature control. Logistics companies can also offer security monitoring services, including a face-to-face check of individuals and patients at the time of delivery of kits, medicine and food.

Japanese company Yamato Holdings for example is offering many of these services in Japan. These services include refrigerated delivery of samples and medicine between individuals, manufacturers and wholesalers. The company is also in partnership with a supermarket to offer shopping support services for the elderly, handicapped and sick in the shape of daily food deliveries, while trials of face-to-face health checks at the time of food delivery are ongoing.

Another Japanese company, Suzuken, offers delivery services from pharmaceutical companies to wholesalers, retailers and medical institutions and end customers using normal and refrigerated transport options.

By working with other key suppliers such as regulators of health quality, electronics, medical equipment and pharmaceutical suppliers, as well as telecommunication and security providers, logistics companies and managers have global opportunities to stake new ground in the rapidly growing home health and medical care market.

Collaboration in the World of Transportation Networks

In the today’s world of global commerce and supply chains, reliable and efficient delivery services are essential. The transportation networks that provide these services are cornerstones of successful economies and nations. Transportation networks at their most fundamental level are made up of people and policies, products and processes. For a network to provide consistent and optimized delivery services, its policies and processes must ensure precision and excellence and elicit a passion to perform amongst the people underpinning the network. Additionally, the components of the network need to work together efficiently and smoothly ensuring that goods are delivered within the promised timeframe, while at the same time providing a seamless and coherent experience to customers.

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With countries and markets around the world becoming more interconnected and interdependent, transportation networks face major challenges. The volatile environment, in which businesses operate, requires resilience from logistics solutions. At the same time the needs of customers are becoming broader, and in particular the precision in service delivery is becoming more critical for the increasingly complex supply chains. Few players today have the reach and coverage to satisfy these demands, using traditional sole ownership-based network models. Ownership networks are limited by the financial resources to establish the assets and structures these networks are built upon. Furthermore, building ownership networks takes time.

The more flexible model of a transportation network that can meet these challenges and cope with the demands of the modern world is a network based around collaboration – that is a network where the assets are not owned by one company, but instead belong to multiple owners. Such a network is about sharing – sharing of vision, sharing of investments, and sharing of risks and gains. It is also about frameworks, about flexibility and about focus. The collaborative model allows companies to offer services and reach beyond their own borders and means. At the same time, each partner can focus all efforts on the specifics and dynamics of its market, while the network or lead entity and partner is ensuring network coherence. The result is a network that responds very well to local requirements and rapidly adapts to changing demand patterns.

In order to better understand the collaborative model, it is best to contrast it against the traditional model for network businesses – the sole ownership model. At a conceptual level, the difference between the sole ownership model and the collaborative model can be described as integration across the value chain versus value added.

 

How does the collaborative network differ from the traditional sole ownership model?

Sole ownership networks are built around a single asset base, whilst collaborative networks are built around a shared vision. Sole ownership networks seek differentiation predominantly through “hardware” (e.g. trucks, planes, buildings…), whilst collaborative networks do so predominantly through “software” (e.g. processes and relationships…). Consequently, sole ownership networks seek advantage through controlled own assets and sometimes feel constrained by a shortage of “hardware” in the form of capacity. Collaborative networks, on the other hand, seek advantage through combined knowledge and capabilities and sometimes feel constrained by a shortage of “software” in form of partners.

Looking at it in more detail, sole ownership networks are built on the underlying belief that quality and an efficient operation can best be ensured by owning in one hand as many network components as possible. The key integrating factor here is total control and clear direction through the sole ownership of assets. The ownership network is focusing on harmonizing through standardization and training. Collaborative models are built on a different paradigm. They are driven and differentiated by design and efficiency of process rather than the assets that underpin the network. The network or lead entity and partner in a collaborative network taps into the capacity and capabilities, talent and knowledge of various players and needs to manage diversity in an inclusive way.

In practice, most transportation networks are a mixture of ownership and collaboration, though they do have tendency towards one particular model. Consequently, there are predominantly sole ownership networks, with most assets on a single balance sheet, and there are predominantly multiple owner networks, with assets spread across several balance sheets.

The approach to product offerings and meeting customer demands varies across the two types of network. The needs of customers vary from market to market, as a result of local geography, culture, infrastructure etc. These variations need to be factored somehow into the product offering of the network. Sole ownership models tend to adopt a single centrally developed offering in all markets across the world. This ensures a high level of coherence globally, at the detriment of showing less adaptation to the intricacies of local customer demand. Collaborative models tend to set a broad global product concept and a minimum set of global operating standards, and then allow the local entrepreneurs within the network to respond to specific customer needs within this framework. This enables tailoring of product offerings to local market needs, but may sacrifice on the global harmonization of the offering. Both models have their own strengths and weaknesses and each appeals to different types of needs and customers.

For both network types, local operations and their offerings are connected by a common network architecture. Ultimately both, the local operation and the network operator are responsible for ensuring that goods are delivered on time and in good condition. In order to achieve this, both models require IT systems that can manage massive information to support the steering and monitoring of cross-partner processes. Due to their standardized product offerings and the fact that only a single party accesses the systems, one can imagine that the IT architecture for sole ownership networks are relatively simple. However, they are often heavy systems as they have to cover all needs of all entities – a closed shop and system approach. In contrast, collaborative networks require a more complex core element, which can support greater interfacing capabilities, the flexibility to integrate the various partner systems, and the ability to adjust to tailored local product offerings. While the smaller core is a rigid module, the interfaced partner systems remain flexible and can be well tuned towards varying local market needs – a more open system approach.

The most significant difference between the sole ownership and collaborative models is their management culture and philosophies. Sole ownership models have a general tendency towards top down shaping and a “command and control” culture. For collaborative networks, no partner, not even the network or lead entity has total control over the network assets. This makes this “command and control” approach unfeasible. With this type of model, only strategic vision and operating frameworks are introduced top down, ensuring a coherent business model and that all partners are moving in the same direction. Beyond this, operational decisions are generally taken bottom up, though this is within the common framework developed by the network or lead entity and partner. This ensures consistency, while enabling effective adaptation to local markets. Thus rather than a “command and control” approach, the leadership approach in collaborative networks can be characterized by “teamwork and entrepreneurship”.

 

What are the key factors that ensure the success of collaborative networks?

The key factors that are essential to the success of the collaborative model can be described on three levels: the “leadership and strategic” level (why), the “operating” level (what) and the “management” level (how).

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In respect to leadership and strategy, integration and alignment are key factors. Integration in collaborative networks starts with alignment between partners, which in turn comes through shared visions, beliefs and concepts – the jointly accepted strategy. This alignment within collaborated networks can only be achieved, when the leaders and often owners of the participating companies are willing and able to align themselves with each other. Leadership is crucial for ensuring a collaborative network is well integrated, which drives the success of the business community and the success of each individual partner.

In respect to network operations, common references are needed. These can be provided for example by a franchise concept. A franchise provides common frameworks, standards and common and individual targets. It outlines the rights and obligations of parties involved and fosters an entrepreneurial drive amongst franchisees. Consequently, the franchise concept is an effective tool to integrate collaborative networks and ensure that seamless processes exist across the network. This ensures a coherent and consistent customer experience, while the entrepreneurial spirit of the largely autonomous franchisees ensures the most commercial approach to the business and different markets.

Making a collaborative network work in day-to-day life and requires a management style that supports “teamwork and entrepreneurship”. The contracts and cultures of the different network members have to support this approach and spirit. At the beginning and more importantly as the collaboration progresses, a constant dialog between partners is essential to prevent and address concerns and tensions that may emerge. Effective communication skills and an ability to understand and adapt to different cultures (whether that be a corporate culture or the culture of a country) is key to enabling this dialog and bridging the gaps between the different partners.

The warrants of success in any kind of collaborative model are first of all strong leadership and a clearly defined strategy. Successful collaborations are built around shared vision and ambitions and a common set of value shared by all partners involved. They can be sustained over time by mutual benefits and joint prosperity. Achieving this requires clarity and alignment in terms of the respective strategies of the individual partners. Collaborations should be a core element of the strategy, endorsed and announced by the top management of each partner organization. This canon of aligned messages needs to filter down through all levels of the collaborating organizations. In their early stages, collaborative partnerships need to focus on realizing “quick wins”. This can be about ensuring agreed financial and operational milestones are reached, as well realizing softer achievements such as rapid knowledge transfer and sharing of best practices. This allows all partners to see the benefits of the collaboration early on, thus cement the partnership. In collaborative transportation networks, brand is also an important strategic factor. While its brand is often the core value that the network or lead entity and partner of a collaborated network brings to individual partners, this does not mean the network or lead entity brand becomes the common brand, or that local brands should be replaced. The network may well wish to respect the existing local partner brand and leverage the goodwill it has built up in its community. However, some sort of commonality is helpful as the reference for customers, for example co-branding with a shared alliance and network brand. The brand functions as a common signature for customers and the network and business community, standing for the coherent customer experience that is provided.

At the operating level, integration is driven by product concepts and standards, aligned processes, and interfaced IT systems. Customers demand a coherent offering, which requires the same broad product concepts and standards to be used across the common platform. Aligned processes and flexible reliable IT interfaces enable this by making effective and efficient network management possible. While local processes have to be tailored to support local offerings, common standards across the network ensure the seamless flow of goods.

At the management level, alignment of governance mechanisms is a key enabler of successful integrations. Contracts with collaboration partners underpin the network and are undoubtedly the most critical governance mechanism as they summarize all critical factors. A prudent approach to forming a collaborative network is to gradually upgrade contracts as partnerships evolve and strengthen. Beginning with a “lighter” collaboration agreement (for example some sort of agency or service arrangement), and then eventually progressing through to a fully-fledged franchise contract minimizes risks and ensures, the suitability of partners can be thoroughly assessed before they become fully entrenched in the network. Participations cement the relationship. Road maps attached to the contracts serve as useful reference points for the discussion amongst the partners.

 

Which is the better model: collaboration or sole ownership?

The case can be made for either of the two network models.

The sole ownership model clearly has the advantage of robustness, as well maximizing profits since they do not need to be shared between various partners. While the model is very rigid, it allows for a clear global standard – one company, one brand, one offer – suiting those who believe in a high level of standardization. Through its tendency towards central command and control, the ownership model usually provides greater confidence to shareholders, management and employees and enables the faster implementation of new ideas and concepts, policies and procedures, processes and systems. However, this often comes at the cost of high investments in assets and ramp-up phases.

The collaborative model, on the other hand, enables each partner to focus on their core activities and strengths. Although profits are split amongst numerous partners, collaborative models enable expansion beyond financial and knowledge barriers of individual companies, through shared investments, expertise and risks. While decision making and implementation of new ideas may be slower, due to the numerous partners involved, this is offset by the natural tendency for collaborative networks to allow for greater operating flexibly and tailoring to the needs of local markets and customers. Instant reach is possible when fully-fledged operations are connected. However, this comes at the cost of less cohesion.

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In summary, while the sole ownership model is a very effective and coherent way of running a business, applying the collaborative partnership concept to a supply chain eco-system and logistics value chain is a smart and responsible way to run a business as existing capacity is combined and used – in fact, the collaborative culture promotes the creation of value beyond the organization, for partners and customers alike.

Infrastructure and Logistics – Prerequisites for Sustainable Growth

A country’s prosperity, and with it its economic and social development, depends to a large degree on the level of productivity of its logistics sector. Today’s economies are unthinkable without the value and supply chains that modern logistics make possible. And there can be no long-term peace without prosperity, as the turmoil in Egypt or the economic endeavours of emerging nations demonstrate. More and more governments are coming to recognise the importance of logistics as an important growth factor and thus are attempting to improve the performance of their logistics sectors. An efficient infrastructure is a prerequisite for efficient logistic platforms, since run-down streets, ineffective seaports, one-track railways, or a lack of freight airports impede the smooth movements of materials and goods and thus economic growth. Therefore, it is vitally important in particular for emerging economies such as the BRIC nations, as well as for developed industrial nations like Germany, to make investments in infrastructure. They are necessary in order to be able to handle increasing trade volumes and to secure or improve the country’s competitive position as a business location. In view of increasing transparency, as well as mega-trends like climate change and the increasing scarcity of resources, the topic of sustainability is also gaining in importance.

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The BRIC nations, Brazil, Russia, India, and China plan significant investments in infrastructure, and business, politics, and society will have to develop new ways of thinking about logistics.

This whitepaper has been published at Transport Intelligence on 8 August 2013.

Brazil: Major investments required to ensure further economic development

With around two million kilometres of roadways, Brazil has the second largest road network in the world. However, only about 200,000 kilometres are asphalt roads, and the streets are often in terrible conditions. Together with the highly outdated railway tracks and inadequate airports, this means that Brazil’s transport infrastructure is the biggest obstacle to economic growth and prosperity. That is the reason why, in 2012, the Brazilian government decided to make major investments in the infrastructure. One such measure was that the government granted concessions to private investors who will lay and operate up to 10,000 kilometres of railway track and build around 7,500 kilometres of roads.

The fact that about 60% of the transport volume is moved by road underlines the importance of these measures. In addition, new intermodal hubs will reduce road traffic in economic and logistics centres like Rio de Janeiro and other major cities (“Brasiliens 66-Mrd.-Dollar-Programm,” Financial Times Deutschland, August 15, 2012).

Furthermore, the country faces challenges in the area of rail transportation, since the system works significantly below American or European standards and network density. The 29,000 kilometre long network is centred on the states of São Paulo, Minas Gerais, Rio de Janeiro, and Rio Grande do Sul. Some of the tracks are in deplorable conditions and the fact that the Brazilian system uses differing gauges also complicates operations. As a result, the Brazilian railways carry only about 25% of the country’s total cargo volume. Investments in a number of freight railway lines are intended to improve this situation. Further improvements are expected from the new East-West and the new North-South link.

The seaports are Brazil’s most important interface to world markets. Insufficient cargo handling capacities, too shallow channels, and poor rail and road connections are major disadvantages. Inadequate parking space for trucks in the ports and poorly qualified employees are further factors causing challenges to shippers and logistics companies alike. Government support and private investments are necessary to bring the Brazilian ports up to world standards and to ensure Brazil’s competitive position in world trade.
Russia: WTO accession leads to investments in the transportation and logistics infrastructure.

Russia, which has further opened to world trade with its accession to the World Trade

Organization (WTO), now needs to step up its investments in infrastructure. Sub-optimal roads regularly cause transport delays and breakdowns. According to Germany Trade Invest (GTAI), rundown streets cost Russia 9% of its economic potential. Of course, the influence of the climate and its effects on the road system are not to be underestimated. Specific investments are being made with the goal of increasing the number of multi-lane highways, which currently account for only 8% of the roads in Russia (Umann, Ullrich: Russland tätigt umfangreiche Infrastrukturinvestitionen).

Some of the large-scale projects in this area include the construction of new motorways, like the link between Moscow and St. Petersburg, the development of the M4 motorway into a multi-lane highway from Moscow to Dzhubga, and investments in the M1 as one of Russia’s most important routes. The M1 links the Russian capital to Western Europe and is also part of the Asian Highway network. This project was initiated in 1959 to improve the road system in Asia and involves collaboration among 32 Asian states and the United Nations (ESCAP). Road construction is being fostered at the communal level, as well. The city administration in Moscow is planning to invest more than €24bn in modernisation by 2017.

Russia’s rail network is another major construction project. Because of the sheer size of the country, railways play an important role for both passenger and freight transportation. The Trans-Siberian Railway and the Baikal-Amur main route between Siberia and the Khabarovsk region, as well as numerous secondary lines, ensure that the country has well-developed east-west connections. Thanks to these, cargo only takes 16 days to get from Busan to Helsinki, compared to 47 days on the sea route. Rail connections have gained further importance since Russia joined the WTO. Consequently, the government decided to invest in two high-speed lines: Moscow-St. Petersburg and Moscow-Yekaterinburg.

The freight lines to and from the major seaports are also being improved. For valid reasons: goods like crude oil and petroleum products are exported via the ports in St. Petersburg, Kaliningrad, Novorossiysk, Sochi, Vladivostok, Nakhodka, Magadan, and Petropavlovsk-Kamchatskiy. The (North) Atlantic port of Murmansk, which is kept ice-free all winter, is also a major export hub. Ocean transport accounts for a total of 85% of Russia’s foreign trade. Inland waterway transport is also carrying increasing tonnage and showed a growth rate of 20% in 2011. Seaports are the focal point of expenditures in the area of port development, which is intended to reduce dependency on cargo handling capacities in the Ukrainian and Baltic States’ seaports. In addition, investments are being made in the ports of Taman, Tuapse, and Novorossiysk, as well as Olya.

India – Massive investments in infrastructure are needed for progress towards an industrialised economy

India is well on the way to becoming an advanced economy, but the road is still a bumpy one. The subcontinent is already one of the leading nations for chemical production. At €76bn, its sales volume in chemicals ranks number eight worldwide and is ahead of Italy and Great Britain. It is expected that India will be able to improve this position even more in the future. According to experts, India will be one of the major growth markets for the global chemical industry. Well-trained employees are a major advantage, but high costs for raw materials and energy, as well as low productivity, are the challenges that India is facing. However, it is India’s infrastructure which is the key bottleneck on its way to becoming an economic leader, since it is responsible for high transport costs and regular delays in exporting goods and products (“Indiens Chemieindustrie schafft Anschluss an die Weltspitze,” Chemanager, January 16, 2012; http://www.chemanager-online.com/news-opinions/nachrichten/indiens-chemieindustrie-schafft-anschluss-die-weltspitze). Almost all transport modes are affected. Investment is needed in roads, railways, air traffic, and shipping.

Around 70% of India’s cargo is transported by road, some of it under very difficult conditions. Only about half of the approximately 3.3 million kilometres of roads are asphalted. The National Highways, which account for 65,000 kilometres and connect the major cities, generally only have two lanes and some of them are in terrible shape. In addition, the more than 130,000 kilometres of State Highways do not have unified standards. In the poorer states of India some of these are only one-lane roads.
The railways handle the other 30% of India’s cargo transport. With a total of 64,000 kilometres of track, India’s rail network is the second largest worldwide, following China. However, outdated technology and a low level of electrification, as well as four different gauges of track, prevent efficient use of the Indian rail system. Investments are planned in electrification, double-track main lines, conversion of metre gauge to broad gauge tracks, and modernisation of the technical equipment.

At the same time, the Subcontinent needs to invest in water and power supply. Power blackouts and gaps in the water supply are still common throughout large parts of the country – with all the negative economic consequences. Without electricity, production is impossible, completion of products is delayed, and thus agreed deadlines and contractual obligations cannot be fulfilled. This all leads to losses, in some cases even to contractual penalties. This is one of the key reasons why manufacturing has only been able to contribute a relatively small share to India’s economic growth thus far.

The Indian government is well aware of these circumstances and therefore has announced that it is aiming to spend a total of a trillion US dollars on infrastructure development. A major part, but not all, of this package has been included in the five-year plan for 2012-2017.

China – need for sophistication in logistics in the world’s second largest economy

China has set the goal of putting €124bn into road, highway, and airport construction (“China pumpt Milliarden in die Infrastruktur”, Financial Times Deutschland, September 7, 2012). This budget will cover the costs of up to 30 infrastructure projects that will ensure economic growth and social prosperity. Thirteen highways and ten city street projects, as well as five seaport projects are planned. In addition, two inland waterways are to be improved.

While China’s urban areas have traffic systems that are up to European standards, in the more remote regions of the country, which covers over 9,571,302 square kilometres, transportation is often still below par. Furthermore, cargo volumes have been increasing rapidly over the last years. For example, freight haulage by the railways grew from 535 billion metric ton-kilometres in 1978 to 2,482 billion metric ton- kilometres in 2008. This represented a major challenge for the Chinese rail network and led to transportation bottlenecks. Therefore, the government began setting rail transport contingents. The planned 4+4 PDL rail grid, which is made up of high-speed rail corridors, is intended to bring relief. China’s high- speed rail network, with a total length of 50,000 kilometres, aims primarily at speeding up passenger travel, but along some stretches mixed use with freight trains is possible.

Further infrastructure projects include new long-distance corridors in the west, upgrading existing single- track lines throughout the nationwide network, and the provision of additional capacity for freight transport. Among other things, the current coal transport routes will be improved and further corridors added. In addition, a new 16,000 kilometre long container train network will be constructed.

The Chinese government recognised the importance of infrastructure for the country’s prosperity early on and has made it an integral part of economic growth packages. With its centralised planning, China was able to implement infrastructural programmes quickly and extensively and thus set up the prerequisites that enabled the country to catch up with the leading economic powers in the world. However, logistics expertise in China is still under-developed. Therefore, entrepreneurs like Jack Ma, the founder of the e- commerce giant Alibaba, have been investing in logistics development and are intensifying their efforts to bring China up to world-class standards in logistics, as well. Otherwise, companies like Alibaba will struggle in certain areas to continue growing at the targeted pace.

Germany: increasing investments in maintenance and sustainability

The industrial nations are also showing increasing needs for investments in the infrastructure. In Germany, for example, numerous bridges and roads are in bad repair and need to be renovated. Therefore, the Federal Parliament’s Finance Committee approved an addition of €750m to the transportation budget in 2013.

This sum will be invested primarily in the number one mode of transport, roads. But this will not only benefit cars and trucks; at least €10m are to be invested in bicycle paths along federal highways. All in all, the budget will provide €570m for investments in the road networks.

In comparison, the €40m dedicated to the railways seem marginal and this money is to go to a new noise control package. Another €25m is available for railways that do not belong to the federally owned system. This is the first time that the independent railways will benefit from such stimulus. Another €140m will be invested in waterways, bridges, locks, and dams.

A fresh look at logistics and infrastructures

Many countries throughout the world are making significant investments in infrastructure. However, this alone is insufficient. In view of the global mega trends, such as worldwide population growth, mass mobilisation, scarcity of resources and land, climate change and the increasing awareness of environmental impacts, continuing globalisation, tightly integrated and thus increasingly complex and risky supply chains, it is essential that we re-think logistics infrastructures and systems. Infrastructure and logistics planning, both at domestic and international level, needs to be grounded in a comprehensive understanding of the economy and society, and the logistics sector must increasingly live up to its role as a key enabler for growth and prosperity.

We need to develop fresh ways of thinking which can help ensure that transport and handling hubs contribute to the growth and prosperity of individual countries, regions and the world economy. Concepts are required which not only promote economic growth, but also help improve the common good. Concepts are needed that not only serve individual interests, but also aim at maximising value for the entire system. Development of clear local competitive advantages and of services that increase productivity and improve business conditions for manufacturers and logistics service providers alike must go hand in hand with measures to ensure sustainability.

Modern seaports can serve as an example for the way infrastructure can be shaped in future. Ports have to be viewed from a global perspective and as an integral part of the region; which has to be considered in the planning process. The starting point is a clear understanding of what all the stakeholders expect and need. For example, ports are expected to provide a broad range of services starting with warehouse capacity for all kinds of goods including dangerous cargo, foodstuffs and other temperature-sensitive goods, as well as container leasing, repair, and cleaning, up to comprehensive security plans on-site. These reduce the risk of theft as well as potential terrorist activities. Environmentally sound disposal of oily wastes, ships’ waste water, or solid waste and chemicals is also an essential part of a modern port’s range of services, as are noise reduction measures and traffic safety systems that ensure safe and efficient waterside and landside operations in the port. In an increasingly transparent world, there will be rising demand for competitiveness and sustainability. The concept of a smart seaport pays attention to sustainability, while at the same time increasing productivity through the use of state-of-the-art technology, embedded in a holistic concept. Such ideas can also be applied to other areas, for instance inland ports and airports, as well.

Those responsible can make good use of the digital interconnections between the economy and society in implementing these and other added value services. For example, real-time data on ship movements can be leveraged to coordinate landside processes more efficiently. When docking and unloading times are known well in advance, logistics service providers can optimally plan and schedule their operations so as to reduce costs and optimise the utilisation of resources. Increasing digitalisation in logistics and the continuing spread of RFID makes processes more efficient and safe, since containers, pallets, and wire mesh containers can be tracked worldwide, thus boosting productivity and security. Furthermore, it is possible to simulate alternative contingency plans. In this way, service providers can find optimal solutions and respond quickly in case of unexpected events such as accidents or natural disasters.

In order to put such concepts into practice, it is necessary to have a high-performance infrastructure and also transverse platforms that are often developed and implemented not by just one stakeholder, but by collaboration among diverse stakeholders. Modern logistics concepts often require not just foresight and openness to change, but also the ability to cooperate with various stakeholders. Many companies and governments will have to shift their way of thinking and acting away from concentrating on competition and differentiation towards looking for common interests and joint activities.

Facilitating continuous dialog with stakeholders

Large parts of the population in general will have to change their ways of thinking as well since they often over-emphasise the negative aspects of infrastructure and logistics projects. The most common arguments that logistics facilities and service providers face involve concerns such as high land consumption, increased traffic, more noise pollution, and environmental impact. Such worries are often fed by a lack of knowledge or by uncertainty. Many citizens and local residents do not consider the whole picture. People tend to focus on isolated issues, neglecting the economic and social benefits and advantages of the overall system. Large parts of the public often oversee that the area-wide supply of food and other goods would be impossible without warehouses and commercial traffic. Modern life needs logistics systems, which at the same time benefit the community and have very limited negative impact. In order to raise the understanding and acceptance throughout the population and to avoid resistance and failure of logistics projects, the logistics sector has to facilitate a continuous dialogue with all relevant stakeholders. In this light, it is important to take concerns seriously and to inform the public continuously about respective measures for risk mitigation and about the importance of logistics for the economy and society. The connections between logistics and economic and social welfare need to be stressed constantly.

This can be achieved if technological, environmental, and social aspects of logistics are integrated into national, regional, and global strategies. These need to be grounded in appropriate regulatory frameworks and developed by the logistics industry. Thus, the logistics industry must develop master plans for its sector and contribute to area development initiatives. These plans should aim at creating holistic logistics systems that are embedded in macro-economic strategies. The logistics concepts and plans must respond to the concerns of all stakeholders and at the same time provide efficient supply chain solutions and systems for businesses and the population as a whole.