Logistics as global backbone

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Logistics is a key enabler of industry. It is an essential service, not unlike basic infrastructure. Without it, the economy and world trade comes to a halt.” –Choi Shing Kwok, Singapore’s permanent secretary-ministry of transport

I noted in a post earlier this week a big meeting here in Washington D.C. under the joint auspices of the U.S. Department of Commerce and of Transportation about the critical role supply chain management plays in making America competitive in the world’s markets.

Now, this is neither a new idea nor one uniquely American, for supply chain management and the logistics networks it controls are of major interest in all four corners of globe.

Choi Shing Kwok, Singapore’s permanent secretary-ministry of transport, illustrated the global importance of logistics in the keynote speech late last month during the very first International Symposium on Maritime Logistics and Supply Chain Systems.

“The traditional view of logistics gave it a backroom and functional role not fully deserving of senior management attention. This perspective has changed,” he said. “Today, logistics has become a knowledge service to drive both the top and bottom lines. Logistics is now a key source of competitive advantage for both companies and countries.”

This view, I think, is critical for truckers in the U.S. to absorb because they play a very key role in providing several of the critical links within global supply chain networks – and, in some cases, managing the parts if not all of the connected chain as well if they have divisions devoted to providing logistics services, as carriers such as Schneider National do.

Yet logistics is not a stale, one-note field of endeavour anymore – something Choi Shing Kwok stressed in his remarks. “Logistics is a dynamic field and old logistics methods and processes that had worked well in the past will not continue to work in the future,” he said. “Containerisation, the advent of air express services, the rise of 3PL [third party logistics] services – each transformed the world of logistics and brought new innovative companies to the fore while leaving those unable to adapt behind.”

Furthermore, demands on the supply chain have become more sophisticated, he stressed. “Supply chain performance is no longer measured in terms of just efficiency and lower costs, but also responsiveness to changes in demand, integration with suppliers and channel partners, and so on,” Kwok stated

“The definition of good logistics services has become more complex and multi-faceted. Staying ahead in logistics therefore requires new technological advances, new operational innovations, and even new business models,” he added. “It calls for a commitment to R&D [research and development] and continuous innovation.”

Complicating this already complex picture, however, is the rapid move toward “green logistics” on a worldwide front, Kwok noted.

“In particular, concerns over climate change are creating demand for supply chains with lower carbon footprints,” he said. “Shoppers, especially those in developed countries, are showing a preference for companies that demonstrate commitments to lowering their carbon footprint ... [and] companies have responded.”

For example, he pointed to retailer Marks & Spencer, which targets to go carbon neutral by 2012. These companies will in turn put pressure on their logistics service providers to lower their carbon footprints, Kwok warned, adding a new dimension to what it means to deliver good logistics services.

“Besides market forces, we can expect stiffer regulation on carbon emissions in the future,” he added. “International discussions are well underway for a new regime to mitigate carbon emissions ... [and] the transportation and logistics industry will be expected to play its part.”

Such efforts are already afoot here in the U.S., led by the Environmental Protection Agency and California Air Resources Board – efforts that will directly impact trucks and the logistics services they provide. Expect to see similar measures, though, in other parts of the world, which may balance out the competitive effect of such “carbon control” measures.

The key take away, however, is how good logistics services are increasingly viewed as a competitive skill in the world of freight management – and not just by the U.S. It’s a global view and one U.S. truckers must recognize so they can adapt and provide more value to their customers in this arena going forward.

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