Latest thoughts on Transformational Logistics

In the past two weeks over 10,000 people have visited this Blog. Transformational Logistics is an umbrella term for Logistics and the Informal Economy and, with the Majority World being home to 4 billion people the relevance is clear.

Just think … 1.8 billion ovens to heat water and cook; the carpet industry of Afghanistan from mountainside loom to Mall and room; wild honey from Southern India and Pharmaceuticals; 10% of the US Economy is Informal; 27% of the economy of Italy; 76% of the Philippines; 40% of all fruit and vegetables rotting on the way to market in India; bicycles carrying more tonnage than twenty miles of railway trucks; Kerala fishermen negotiating price 30 kms out to sea … on a mobile phone; billions of dollars in microcredits and, roads that dissolve in a monsoon…

Then, there are all of those micro enterprises that are an integral part of huge supply chains. The Toyota model drew considerable competitive strength from the components made away from the factory and many more have followed. Globalisation and outsourcing has taken the role of the Informal economy far beyond the sweat shop industries or agriculture. And this will feature on the Blog in coming weeks. It will take the agenda into some of the biggest industries world wide and, open up the debate on the Informal market and the Green Supply Chain. Exciting stuff!

The informal market has survival in its DNA and, innovation is part of rethinking, making do and making things last. Walk through the sweatshops of Dharavi; consider the “sub prime” loans (sic) that have built up Bangladesh; more white goods are sold into the Favelhas than into the mainstream. And think of collapsing trust in that bastion of the developed world – the Banks. In fact, the Philippines is just one country to report that the informal sector is growing as migrant workers retrun from those countries experiencing the worst of the downturn. These are just snapshots of why it is time to check our assumptions.

Logistics practitioners, Academics and the curious from all over the world – 39 countries and counting – have read through the ideas and there has been useful dialogue by e mail and on Skype.

Momentum builds for this umbrella term for Logistics and the Informal market. Last week I was presenting Transformational Logistics in the USA. This weekend the LSCM presented TL to an NITT Conference in India. Already, Professor Lenny Koh is working on T L and the Green Supply Chain at the University of Sheffield. We are talking with designers about the affordable supply chain. We are looking at ideas on what to do with bikes and flat pack cooling chambers for remote rural areas – there’s plenty of waste paper around these days to be used to mould affordable facilities. In March a delegation will visit Tamil Nadu to explore ideas along the supply chain. And in Kilkenny, it is reported …

Here are a set of powerpoints that start to sum things up …

[T L Intro]

There is more to follow.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter
This entry was posted in T L thinking and tagged . Bookmark the permalink.

20 Responses to Latest thoughts on Transformational Logistics

  1. Mengying says:

    This presentation shows very extensive and attractive picture. I strongly agree that local solution is more welcome to the local logistics status. What can be done to connect remote local economy to wider one?

  2. Mengying says:

    This presention gives extensive and insight of informal market/economy in many parts of the world. It’s impressive and attracting.

  3. srikanth says:

    A great day to you, Rob. I’m one of those blokes inspired by your presentation today to NITT, India, on the informal economy and its potentials. I’m an engineering student here, and all this TL stuff is absolutely new to me – and fascinating too. I’m slowly beginning to think about the world in terms of economics, and this has certainly done a great deal of good to me. I hope it will, to many others too.

  4. Siamak Moshiri says:

    It is great revealing presentation of what is meant by TL and where it comes from. It is an starting point of many future sophisticated explorations about true logistics and real supply chain.

  5. Karen says:

    Very interesting article. I saw you on Alpha Inventions.
    Karen

  6. Siamak Moshiri says:

    The interesting point to me is the part where Rob mentioned about future integrations of green supply chain and informal econonomies. It reminds me of the chapter I was reading in the book of “Hot, Flat and Crowded” by Thomas Friedman, where he explains his experience in Indonesia and the work of local group “Conservation International” to protect the tropical forests. As we all know, Indonesia has been and still is a great benchmark for informal markets and economy. It explains perfectly how the will and empowerment of local retail producers and indigenous can help preserve the environment and sustain an informal supply chain. Thinking about where green supply chain and transformational logistics meet, I believe that there are great cases, like above, to be explored and applied for future model building.

  7. robjbell says:

    The reaction to these slides has been very encouraging with many people in touch by e mail and on skype. Many thanks. I will be writing a Post to cover the points raised when I have digested all of the contributions. Meanwhile …

    Siamak – you raise a very important point. In recent posts I have been focussing those industries within the Informal world such as carpets, textiles and dairy. Many of these rely on farmers and home workers in remote Regions. It is a massive constituency and here the focus is on the less sophisticated materials handling solutions – the adapted bikes; market ready packaging; micro credits; the use of the mobile phone etc.

    There is another area that you are starting to raise. It is those industries that for a long time have defined the industrial era. For example, Auto – what Peter Drucker called “the industry of industries”.

    When Womack,Jones & Roos wrote The Machine That Changed the World they focussed the shift from mass production to lean production: 10k components being pulled together from many suppliers whose operations they only vaguely understand… They started their research in the 1980’s when the Auto industry faced a crisis. Back then, the answers were Japanese and triggered by lean techniques to simplify, combine, eliminate (or outsource) those processes that did not add value. What about now? Are we moving to something akin to “post lean” manufacturing?

    Here’s where the Informal market emerges. Not only have the Big Corporations outsourced to a supplier; that supplier may have outsourced again leaving themselves with an aggregation role. From design to outsource to aggregation and back again to an assembly line…

    As we shape the ideas around T L we need to explore industries like Auto as well as carpets from the mountains or, textiles in the sweatshops. You can’t move a chassis on a bike but, you can make all sorts of components in the informal sector. This is a massive area with serious concerns …

    – Cost reduction drives this approach but the consequences of a buyer migrating constantly to the lowest price can dislocate whole villages overnight. Footloose strategies can wreak havoc. The current downturn is a case in point. We have moved from pure play mass production to outsourcing and a lean model. This means various level of supply (tier 1, tier 2 and so on). Where are we now?
    – Are we about to see the legacy factories in places like Detroit collapse and cars to become like Ikea flatpacks. When is a table a table; when is a car a car? This is not philosophy. The answer for the table is – in the home and, the answer for the car may well have to be close to the same!

    Flatpack autos would see components being made all over the world and final assembly points (postponed manufacturing facilities) being located where the consumer is. For example, you can reach 40 million consumers within 4 hours drive of the Humber in the UK; there are 50 Mega Cities worldwide already generating 65% of global gdp and soon to house 75% of the worlds population. Flatpack autos means the end of Detroit but fast forwarding demographic and, market trends that are already well advanced. And maybe this thinking opens up …
    – the Green Supply Chain. Is a flat pack (the sending of components and building in kit form) lower on a carbon scale? Does anybody know the comparative poistion of, say, Detroit and, the flat pack alternative?
    – Monitoring carbon footprint. Yet again, we come back to what Professor Martin Christopher’s observation that supply chains compete not companies. How can we monitor carbon footprint end-to-end if we do not have the means to track tier 1, 2, 3 and beyond? What can we do to establish a base line?

    Which brings us back to what Martha Chen describes as hybrid models that recognise the informal economy in the mix and the T L perspective emphasises – logistics and the supply chain can transform the outcomes in an emerging and even a developed economy.

    At this point I recall my old History teacher John Oxley chalking up on the Board something like this …

    The Informal Economy is vital to the Auto Industry. Discuss.

    Anybody with examples of the relevance of the informal sector to the Auto industry? We will focus this area in coming weeks. Watch this space!

    Again, thanks Siamak for raising a fresh perspective.

  8. Siamak Moshiri says:

    Good comprehensive expansion, Robert. Yet, it’s hard to imagine for me, at least now, seeing the auto industry follow the kit-model, like IKEA does, or many followers therefater. The differnec is the complexity of design and product. I can assume, a product such as a bike or bicycle be produced based on the IKEA model, but hard to realize an Auto. Having said that, I can not foresee the possibility of that happening given the pace of technology and future trends of industry. Flatpack model could potentially be a simplification of supply chain, having many cost benefit both to suppliers and end users, with lots of positive environmental impacts.

  9. robjbell says:

    Just a clarification – when I speak of flat pack and the bike example it is only to explore what might happen. In fact, much of this is happening already. For example, many cars are built from the same platform with ever more standardised components. Also, few cars are built by a vertically integrated (Ford used to have a cattle ranch for the leather etc) operator.

    Outsourcing has become the name of the game and, the “kit” approach is happening. So, a logical extension could be to re-think the factory model and build smaller ones in key eographies fed by components manufacturers (tier 1,2,3 etc) spread out all over the world. This would mean the development of geographically spread clusters:
    – Components: chassis in Iran; tyres in Turkey; Lights in Malaysia etc.
    – Postponed or value added manufacturing: close to where the consumers are or, at a hub within reach of a maximum number of consumers. For example, Morocco; Oman for the GCC; Kazakstan; Aqaba in Jordan (in the middle of 4 countries); Humber for the UK and so on. I mention these locations at random.

    This has consequences and may have environmental as well as fiscal benefits. What is the carbon footprint of a fully finished car being sent from Detroit versus components being aggregated in a final assembly plant close to the consumer pool?

    Or, as my old history master John Oxley would have put it …

    Postponed manufacturing in the Auto Industry is of greater benefit to the environment than current methods. Discuss.

  10. robjbell says:

    On Saturday 7th February, Rob Bell took part in a Q&A session at the NITT Prodigy Conference held at Trichy. The audience of 94 were mostly Engineers had seen the Powerpoints posted here. The next few comments are questions from that Q&A session.

    [07/02/2009 08:42:02] watashiwa.aditya says: as each region in India is different, how much will the TL vary? What are the factors that affect them?

  11. robjbell says:

    Answer to the different regions of India … A common mistake that is made on China and India is that they are homogenous societies. Clearly, recent Chinese Economic history is characterised by more than one speed. Not everywhere is like Shanghai! I visited North East China not long ago and met with the Mayors of Dalian; Changchun; Jilin and then several towns, villages and then, communities in remote rural areas. I have a set of photos of the mayos and, Main street in each place. It is a revealing picture. We start with a sophisticated be-suited professional Public Servant with a degree in Chemistry and an interest in Porter’s cluster theory and Arsenal Football club. We were driven to the meal at a top class restaurant in an Audi (made in Changchun). Each place had a different “image” such that by the time we reach the small towns beyond Jilin – a lovely City with a river running through it – the Mayor looked like farmers from Kilkenny in the 80’s wearing hand-me-down suits, buttoned up shirts with no tie. Outside, three wheeler cars scurried about the streets. Further on, we met the mayor of a smaller town and ate on the winter room – a raised platform with corn husks burning below us to keep everything warm.

    My point is this. China and India are not alone in having Regions that differ on every scale. Maharashtra is not Bihar and, Gujurat is not West Bengal. Ask Tata.

    Transformational Logistics could be a catalyst for all sorts of Logistics Techniques that can help a given Region to build connectivity to local, national and even global markets. This is not the role of Military Logistics nor of Humanitarian Logistics. However, by the same token, it is not going to interest the Big Logistics batallions just yet.

    So, to answer your question directly – Transformational Logistics recognises the fact that the vast majority of people in these remote States live and work in the informal economy. There is a need to build hybrid models that do not reject them because of their status and ignore them because they are remote.

    After all, in the recent exodus back to rural China for the New Year celebrations (over 200 million people make this journey; which is more than for the Haj!)- how many had to stay because they have no jobs to go back to in Shenzen? All the more reason to build connectivity to remote districts and do so using Logistics to transform outcomes.

    Thanks for the question.

  12. robjbell says:

    Another from the NITT Q&A …

    [07/02/2009 08:42:58] ganesh – please give a layman’s example of how TL integrates Formal and informal economies?

    Many industries have outsourced much of what they did. Take Clarkes shoes of the UK. In the 1980’s they had factories throughout the UK and Ireland. Then, they concentrated on marketing and their High Street stores to source from manufacturers and suppliers all over the world. The same for Auto manufacturers; the same for textiles and so on…

    The question is, are we absolutely certain that every single facility that makes the items sold on the “formal” High Street are made under the fully regulated conditions that exist in, say, those factories that many companies in the US and Western Europe closed when they chose to outsource? One thing is for sure, many companies deal with suppliers who do not have the capacity to deal with fluctuations in demand so, they aggregate from a constellation of tier 2 and tier 3 suppliers. This is where the informal community plays its role. And this model can take out the bull whip effect from the supply chain.

    The same is true of those products that depend on home based production such as carpets (Iran, AFghanistan etc) or even dairy. Leather is another example – just walk round Dharavi in Mumbai.

    So, there are many examples. However, the whole picture is not understood well enough. This is where Transformational Logistics comes in – to act as a catalyst to explore this very question.

  13. robjbell says:

    Another for the NITT Q&A … adhitya asks:
    [07/02/2009 08:44:42] How has Dubai’s approach allowed faster development that has not been seen anywhere else?

    Dubai / Shanghai / Mumbai … maybe it is because they rhyme! However, people have become obsessed by the success of these places and the magnetic field around them draws us all in…

    Maybe you should ask an Indian working in construction in Dubai the same question. He may answer that this model could be unsustainable. Why? Because it is based on Tourism / Airport / Port and, because Dubai does not generate oil or gas revenues (like Abu Dhabi or Qatar) it is highly leveraged on debt. A drop in the value of sterling hits tourism as does unemployment worldwide – especially in the Banking sector. And then, a drop in imports hits trade and so on …

    More fundamentally, the issue of sustainability comes from the skills base – or lack of it. After all, 97% of skilled workers in the UAE come from overseas. This cannot continue and localisation policies are in place to redress the issue of local workers. It is exactly the same – far worse – in Saudi Arabia. In fact, once the economy picks up in India you could ask the question – how will Dubai cope if skilled Indians go home?

    Having said that, Dubai has done many things that are absolutely superb. The idea of becoming Central World; of creating a purpose built Logistics hub is brilliant. Their view of a Port is quite unique. Instead of seeing this from the perspective of the ships, companies like DPW break new ground in seein this as a Supply Chain. And then, they link Port / Logistics Park and Manufcaturing Facilities in the same place. This Logistics hub is then pulled together with a multi modal transport network featuring road / rail / air – all linked to the Port and its surrounding facilities.

    This is what Morocco is doing in Tangiers and what DPW are developing at London Gateway.

    By the way, it is what they should do in Mumbai. Close down the docks downtown; push EVERYTHING out to Neva Sheva and other Maharashtra ports and use the downtown area as a Real Estate project. Take Portland Oregan in the USA. The waterfront was a disaster of congested and run down warehouses; docks; railway tracks and public sector offices. They created a Bond covering the whole area, moved the port along the coast and regenerated the downtown area with the cash generated. In the process, like Covent Garden or Cape Town, they preserved run down Victoriana and created a major tourist attraction.

    Just as China should not become every Developed countries “default” solution on outsourcing; Dubai should not become the model for India to follow on its path to sustainable growth. This is where T L comes in … After all, Dubai – like Singapore – does not have a massive Informal sector and that is a reality you can’t ignore.

  14. robjbell says:

    And a final one from the Q&A NITT session … [07/02/2009 08:43:32] watashiwa.aditya says: How will TL work toward tapping large informal economies like india?

    TL will not so much “tap” as work to develop hybrid business models that recognise the common purpose and synergies between the informal and formal communities. This is no Clash of Civilisations. And logistics can play a key role in transforming outcomes in an affordable and appropriate way. Look at the Blog for examples from all over the world.

    There are other ways …

    – The role of women in Logistics. The UoHLI ran a programme to mentor women in the Logistics industry. It ran out of funding… However, it taught me how key to success this will be. We are VERY keen to attract women into the TL project asap.

    – Skills. India is well known for its demographic dividend. However, in the current downturn, we run the risk of transfroming this into a demographic deficit IF we allow a generation to wither on the vine.

    There is a quote that Professor Rod Cross uses from the Proceedings of the Norweigan Economics Society (or something like that) in the 1900’s. It concludes that the unemployed are not like something that you put in a fridge and take out when you need them…

    We need politicians to have the courage their mandate demands to make sure that infrastructure projects happen; that they become the means to build skills capacity and not just numbered bank accounts in Switzerland.

    Yesterday, I was reading about the Congo. It made me think about your question again.

    The Chinese are ready to spend $9 billion on infrastructure, schools and clinics… However, the project is stalling because the Congo is still saddled with $10 billion debt stored up from the days of Mobutu Sese Seko, the dictator. It has little to show for it and certainly no roads or schools. This cash was used to appease a cold war ally long after it became clear that President Mobutu was stashing it all away…

    T L could beome the missing link after Military and / or Humanitarian have covered their agenda. After all, the stablishment of a stable market sevred by a fully functioning set of supply chains with state-of-the art connectivity will not happen overnight.

  15. Satyaki says:

    Hi I am yet another inspired individual from NITT.
    I think the idea of TL couldnt have come into focus at a more apt time. Especially when major economies are reeling under recession or severely reduced growth rates. Exports have dried up and governments(particularly India, China) are looking into the almost unexplored potential of the domestic market which has for long remained something of a mystery. I think if this potential is to be tapped a good understanding of TL is necessary. It absolutely makes for a great topic of research. Ofcourse I am not a widely-travelled person but I do know that a lot of ingenuity exists in the way local businesses function and a lot has to be learned.
    Also,if I maybe so bold as to add, for the time being, TL maybe a means to bring certain economies out of recession.

  16. Rahul says:

    I am a student from the National Institute of Technology, Trichy, (NITT) – Tamil Nadu, India.

    NITT is amongst the premier engineering institutes in India. The Department of Production Engineering had organized a technical symposium called “Prodigy” which served as an active platform for discussion of topics coming under the purview of the industrial world and its economics.

    We had Rob on a conference over Skype to discuss Transformational Logistics and its relevance to developing economies like India.

    Nearly a hundred students were audience to the discussion that included a presentation with down-to-earth examples of TL and its impact on world economies.

    Rob surprised us with his insight and his knowledge about India. It came as a warm surprise to students and the discussion made a lot of sense as Rob was able to relate TL to so many activities in India that go rather unnoticed to the common eye.
    The talk journeyed from the logistics of the Chennai port to the Rajathan carpet weavers to Kerala’s fishermen to Kenya’s bicycle innovations.

    A lot of questions were raised by students during the course of the discussion. Some questioned the relevance of T L, bang in the middle of recession; how T L holds the potential to affect developing economies like India and China; what role do simple innovations like the modified bicycle have to play in T L etc.

    T L is a relatively new topic which does not form a part of the curriculum here in India. I would like to thank Rob for taking time off his schedule to introduce T L to us in a very simplified manner. The topic stirred many questions and created a lot of interest in the students circle. I hope we can have another conference on a bigger scale next time Rob. Thank you so much.

  17. Rahul says:

    Rob. You stress upon the importance of innovations in the informal world. The modified bicycle for increased capacity is a starring example of that.

    These people innovate out of necessity. They have multiple obstacles to overcome and a cost effective solution is of utmost importance them.

    World over, there would be so many innovations that locals would have come up with, for increasing their efficiency of operation without investing too much money.

    Isn’t it possible to use an Engineer’s expertise to fine tune these innovations and then market them to the rest of the world? Isn’t this a big market considering the fact that the number of people requiring such products of innovation is huge?

    The bicycles of Kenya, I’m sure would be an extremely useful product for the Indian milkman who serves milk packets on bicycles with lesser capacity.

    There are millions of people innovating out there to nullify the deterring effects of the obstacles they face. Many of these innovations would be distinct and different in their own sense. “Innovation sharing” would probably make sense if we consider that many obstacles that are faced by the common man in different countries are similar. Only, these obstacles may be on a larger or smaller scale when compared to another part of the world.

    • robjbell says:

      Rahul and Innovation. Terrific question.

      Why not set up a student T L innovatuon club to promote what you are talking about? It might be focussed on specific areas:
      – Productivity. Ways in which things can be done better, cheaper and faster. Have a look at the KIPLING section on http://www.archomai.co.uk And, if you can send me a translation in Hindi and Tamil I would greatly appreciate it!
      – Physical movement of goods. Why not film a simple supply chain from end-to-end and work through the issues and the possible solutions. This is a great place to start.
      – Technology. The mobile phone is opening up all sorts of possibilities. What are they?

      And finally, why not appeal to the Alumni club at NITT to find sponsors. If this makes sense, get back in touch and we can link this to the LSCM Research Group and we would look to explore ways in which IP could be protected.

      This could even be the way forward for some of the NITT graduates to launch their own businesses and / or for others to take up Research work.

  18. Aditya Varadarajan says:

    I am a student from the National Institute of Technology, Trichy, (NITT) – Tamil Nadu, India. I was present for your SCMIS keynote speech as well as the for Prodigy. Your talk about Transformational Logistics and its application in developing countries like India was really insightful.
    Transformational Logistics is a concept that I feel must be explored everywhere. This is possible everywhere as it utilizes only the existing resources rather than external investment. Moreover in times like these(recession), Transformational Logistics seems to be the best answer.

    Question: I would like to know if Green Supply Chain can be interlinked with Transformational Logistics ?

    Thank you for introducing us to such a wonderful concept. I hope this is explored even more.

    • robjbell says:

      Aditya and the Green Supply Chain.

      T L is an umbrella term for logistics and the informal market. Increasingly, environmental issues are a feature of supply chain development and design. For example, consider ISO 14001 and other pending regulations relating to a tightening of environmental factors along the supply chain.

      Few micro enterprises or SMEs will have the inhouse expertise to deal with this issue. Thereofre, it will become a major opportunity for affordable and highly practical support. Have a look at the LSCM Research Group in the coming months.

Leave a Reply

Your email address will not be published. Required fields are marked *

c3Bh

Please type the text above: