Delivering Value and Driving Growth
By Yossi Sheffi
Why is Memphis home to hundreds of motor carrier terminals and distribution centers? Why does the tiny island-nation of Singapore handle a fifth of the world’s maritime containers and half the world’s annual supply of crude oil? Which jobs can replace lost manufacturing jobs in advanced economies?
Some of the answers to these questions are rooted in the phenomenon of logistics clusters–geographically concentrated sets of logistics-related business activities. In this book, supply chain management expert Yossi Sheffi explains why Memphis, Singapore, Chicago, Rotterdam, Los Angeles, and scores of other locations have been successful in developing such clusters while others have not.
Sheffi outlines the characteristic “positive feedback loop” of logistics clusters development and what differentiates them from other industrial clusters; how logistics clusters “add value” by generating other industrial activities; why firms should locate their distribution and value-added activities in logistics clusters; and the proper role of government support, in the form of investment, regulation, and trade policy.
Sheffi also argues for the most important advantage offered by logistics clusters in today’s recession-plagued economy: jobs, many of them open to low-skilled workers, that are concentrated locally and not “offshorable.” These logistics clusters offer what is rare in today’s economy: authentic success stories. For this reason, numerous regional and central governments as well as scores of real estate developers are investing in the development of such clusters.
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 companies since 1987. He is the author of The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage (MIT Press) and Urban Transportation Networks
Excerpts Regarding PortTechLA and MOT
“Some clusters explicitly incubate innovation by building a crèche for innovative start-ups. For example, PortTechLA is a clean technology transfer, incubation, and commercialization organization sponsored by the Port of Los Angeles, the San Pedro Chamber of Commerce and the Wilmington Chamber of Commerce. Its mission is to “attract and mentor companies with technologies that will enable the Port of Los Angeles – and ports worldwide – to meet environmental, energy, security, and logistics goals.” PortTechLA’s chairman, herb Zimmer, added, “We’re looking to attract to our port the type of innovators who are developing new standards-setting technologies.”
Logistics Clusters (p.251). MIT Press, 2012
“Some innovations target reduction in waste by carriers. Marine Oil Technology Inc. (MOT) is a startup manufacturer that recently opened its doors at PortTechLA. MOT’s innovative oil filter reduces the need for oil changes by 90 percent. Not only does the invention reduce the volume of waste oil, but it also reduces maintenance labor. Truckers who need to change their oil monthly might go almost a year between oil changes. “We could save millions of gallons of oil per year,” said Alex Weil, president and majority owner of the company. The invention beats conventional oil filters by filtering out extremely small particles (as small as one micron) and removing liquid impurities that degrade the lubricating oils in truck and marine diesel engines. “One of our missions is to help start-up companies like Marine Oil Technology develop, test and market products that are environmentally beneficial to the maritime industry,” said Jeff Milanette, the executive director of PortTechLA.