How can Logistics improve people’s life03/09/2012
How can logistics improve people’s lives?
Logistics is often condescendingly being regarded as a necessary evil, which is intended for bringing two goods from one place to another. The general public even takes transport and logistics as synonyms, whereas logistics implies much more activities than just transport.
In the current sphere of economic crisis, thinking green and job insecurity, the importance of logistics is often forgotten. However, the logistic sector represents much more than a necessary pain.
Logistics is making an economic, ecological and social effort striving for a better world.
On the venue “How can Logistics improve people’s life”, recently organized by the European Commission, the contribution of logistics was being dealt with from three approaches: an economic, an ecological and a social point of view. Alfons Van Zele was present and listed the following important messages.
Logistics as an economic sector
In a first approach, we can have a look at logistics from an economic perspective. It seems useful to take a look at the position of logistics in the economy, in order to clearly feel its importance.
First of all, it needs to be stated that it proves quite difficult to measure the economic and social impact of logistics, since logistics involves a lot of activities, spread around many sectors and companies. It seems quite evident that brokers, airports, terminals, etc. belong to logistic companies, but many other companies have a logistics, distribution or purchase department as well. Drawing the exact border is thus a hard thing to do.
Nevertheless, an idea can be given of the importance of logistics. In Europe, the sector represents 7 to 14 percent of the gross national product. If we take a look at a finished good, we notice that 10 to 15 percent of that cost is dedicated to logistics. And Europe is doing well: according to the logistic performance index 8 out of 10 countries performing best in logistics are situated in Europe. Number 9 in the list is Belgium, while Germany is the best global performer.
Logistics however are not an isle on its own, but is driven by all kinds of tendencies and movements. According to the Fraunhofer Institute logistics are liable to eight economic megatrends.
Some of those trends are: globalization of production, the development of a society of services and individualization of goods and services. The automotive sector serves as the best example of the latter megatrend. Logistics have to be directed very delicately –with systems such as Kanban and JIT – to keep into account all kinds of needs. Other megatrends are: the growing importance of sustainability, the war on terrorism, the further technological development, outsourcing, concentration or core competences, deregulation and privatization.
In order to cope with these megatrends, a well-balanced logistic infrastructure will have to be erected. This way European logistics will be able to develop and remain competitive with the rest of the world. In the first place, one thinks of roads, railways, ports and warehouses, but equally important are the information and communication infrastructure. Also a thorough educational and training system will have to be installed to teach logistic principles. It is here where we have to situate the services of Zelco.
By means of logistics Europe can differentiate from the rest of the world. A high logistic performance attracts investors and ensures companies and service providers settle down. Logistics are thus vital for the further economic development of Europe.
Logistics as an employer
We can not only take a look at logistics from an economic perspective, but also from a social one. If we consider the European Union, logistics is employing 12 millions of people –the population of Belgium – spread over 1.2 million companies. Above that, logistics recruits from everywhere: low-educated profiles are needed as well as high-educated people.
On the venue “How Logistics can improve people’s lives” Germany was taken as an example. The scheme beneath clearly shows that logistics implies a lot of activities:
(source: Fraunhofer SCS 2010)
The middle of the scheme represents the core: pure logistics. In Germany, this “core” employs around 2.5 million people. Half of them works in transport, 10 percent in planning and order processing. The rest works in inventories, amongst which we also consider warehousing. Logistics also needs third parties to let it properly function, and here, we see that another 700 000 people are employed. The task of those third parties is to set up information systems and produce vehicles and logistic equipment (such as forklifts, scanners, etc.). In their turn, these activities also employ people – almost 2 million – which are taking care of education, development, administration, human resources and communication and information infrastructure. We can extrapolate the German model to all European states, and even to the rest of the world.
Logistics and sustainability
“Sustainable logistics” was the title of the exposition of professor Frank Straube of the University of Berlin. “Sustainability” is a fashionable word which is often uttered, but what does it exactly mean? The best example to illustrate the influence of durability on logistics is the transport sector, because transport will have to cope with big challenges.
A first problem for the transport sector is the dependence of oil. The sector will suffer from increasing oil prices without any doubt, because it depends on oil as a carburant for 95%. Moreover, not only the prices will rocket, but also the demand for oil. While there are 750 million of vehicles on the world today, this number is expected to increase to 2.2 billion by 2050.
A second problem for the transport sector are the measures against the emission of greenhouse gases. By 2050, Europe wants to reduce the emission with 80 to 95 percent, compared to the emissions of 1990. In Europe the transport sector is responsible for about a quarter of all greenhouse gas emissions.
To deal with both problems, transport needs to consume less and cleaner energy. In this discussion, the term “multimodality” is often brought up: one wants to organize transport as intelligent as possible, for instance by train or inland waterways for long distances. Since Europe consists of many different states, one will have to act in a cross-border way. Technology will have to help to implement intelligent advanced systems which reduce emission and energy consumption. Advanced information and communication systems are indispensable in this matter, but there are also other steps in the good direction, for instance by redesigning vehicles. The 2WIN, a trailer with two floors, is a good example.
Green transport however does not always have to imply the implementation of intelligent systems and large investments. Loading trucks in a better way, group goods or reduce the number of empty trucks on the roads – in which transport exchanges might help – are steps in the good direction. Ikea has done great work: by redesigning the packaging of hot plates both stock and transport costs could be saved. While in the past those hot plates were sold loose in a large bag, they are neatly stacked now. By doing this, a pallet contains 30% more goods, and 50 000 pallets less have to be transported and manipulated worldwide. Another initiative was the combination of heavy and light goods in transport, which often origin from different suppliers. Therefore, Ikea cooperates with cluster suppliers, who receive goods from different other suppliers, store them and combine the transport to Ikea as well as possible. Clustering of flows becomes an important code word.
As a solution for more sustainable transport, also the difference in urban and non-urban transport is very often coming back. On the edge of the city, freight terminals are situated, where goods are supplied and carried away via multimodal transport. The distribution of the goods in the city itself is done in small quantities with electrical vehicles. The European Commission wants to see urban European transport completely free of emissions by 2030. A very daring thought. Zelco Logistics development some concepts in this matter which are being introduced step by step.
On top of that, those who are often using the transport infrastructure and pollute, should pay more than those who do not – the so-called “polluter pays principle”. Such systems need to be implemented, and it is important to bring the profit of such a system also to the transport sector itself. By doing so, research can be funded and infrastructure can be improved. Not only the existing national infrastructure has to be bettered, but one should also look beyond the boundaries so as to smooth away bottlenecks and lacks in the infrastructure. One of them is the Seine-Scheldt project, which is meant to connect Northern France with Flanders and the Netherlands via inland navigation.
Also the administrative fuss needs to be reduced: waiting times due to administrative procedures need to be reduced, as well as all the paperwork which accompanies logistics. Europe also wants to strive for unity and simplification. All freight information – for all transport modes – has to be available on one central point. The classic CMR, CIM, bill of lading and airway bill should be replaced by one transport document that fits all transport modes.
Legislation: the White Paper of the European Commission
The idea of logistics contributing to a better world and improving people’s life, does not come out of the blue, but is based on concrete action points. Those action points are embodied in the White Paper of the European Commission. In this work, we find guidelines, recommendations and ideas which are afterwards converted into legislation by the individual European states. The White paper mainly aims at transport and how it needs to be organized to be sustainable.
The biggest problems in the world of transport are: increasing competition, congestion and bad accessibility. Moreover, there are huge differences in the European Union, which hinder an evolution to the realization of the White Paper.
The goal is to keep transport competitive, in order to prevent the market to have monolopies or unfair practices. Meantime, transport needs to improve its sustainability. Therefore, the White Paper proposes some concrete solutions: sustainable fuels, multimodality and an efficient use of infrastructure. If we take a look at the infrastructure in Europe, we see huge differences from region to region. On top of that, congestion is very concentrated.
The European Commission wants to increase sustainability, without giving up competitiveness. Although incentives have to origin from the market itself, this will prove quite hard in the given periods. The striving for more economical solutions to execute a transport activity in order to face competition and to invest in sustainability at the same time are contradictory. The solution to combine those two will be Keynesian: the role of governments will be of utmost importance. In Europe, thinking trans-border will be inevitable if Europe wants to stay competitive with the rest of the world. But the trumps are on hand, and meantime, it is clear that the logistics sector fulfils an important task, both economically, socially and ecologically.
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