Henk Zijm

by Henk Zijm

In today’s global economies, logistics is a key facilitator of trade, and hence an important factor in rising prosperity and welfare. Natural resources are scarce and not evenly distributed in terms of type and geographical location in the world. Logistic chains enable the distribution of materials, food and products from the locations where they are extracted, harvested or produced to people’s homes and nearby stores. At the same time, current logistics systems are fundamentally unsustainable, due to the emission of hazardous materials (CO2, NOx, particulate matter), congestion, stench, noise and the high price that has to be paid in terms of infrastructural load. Things are even getting worse: while the European Commission has set (not achieved) targets to reduce Greenhouse Gas Emissions (GGE) in 2015 to 60 % as compared to 1990, the percentage of transport related GGE increased from 25 % in 1990 to 36 % today.

The still growing world population stresses the need to further increase productivity while at the same time diminishing the ecological and societal footprint. This requires a quality upgrade of the human resource pool by better education and training, including lifelong learning programs. Productivity can also be improved by better support tools, easier access to relevant information, and further automation of both technical processes (i.e. robotics) and decision making (artificial intelligence). The same tools might also help to reduce border-crossing logistics systems’ vulnerability to crime and illicit acts, such as theft, organized immigration crime (human trafficking) and customs law violations.

The continuing urbanization poses a further challenge. The development of wealth in Asia and Latin America has resulted in a huge shift from agricultural and nomadic forms of living to urban life. More and more cities with over ten million inhabitants have emerged, requiring different modes of transport and logistics systems than available today. There is an increasing interdependency between supply chain design or management and urban planning or land-use management. In addition, due to both political conflicts and natural disasters, the importance of humanitarian logistics can hardly be overestimated.

But also consumer behaviour is changing rapidly, demonstrated for instance by the rapid advance of e-commerce, with a profound impact on both forward and reverse logistics and supply chains. Clearly, meeting the continuous pressure on fast delivery is only possible by an excellently functioning logistics network.

Fortunately, technological innovations are expected to at least partially address some of these challenges. The design of new and lightweight (bio-)materials, miniaturization and de-materialization of products helps to diminish both their costs and ecological footprint. Technologies like 3D-printing and micro-machining are also a step forward towards mass-customization but in addition have a profound logistic impact, for instance in stimulating “local for local” production, thereby also reducing so-called anticipation (safety) stocks, because they allow production at the place and time needed.

But also the impact of robotics will change the logistics landscape considerably, as it did already in automotive assembly lines and automatic storage and retrieval systems, assisted by digital dynamic identification systems such as RFID, and all controlled by innovative warehouse management systems. Similar developments are found at container terminal sites in both seaports and inland harbors. Without exception, such systems rely heavily on smart sensor and actuator systems, evolving towards the so-called Internet of Things (IoT). The same IoT is currently innovating both passenger and freight transport rapidly; vehicle transportation in 2050 is foreseen to be largely unmanned transportation.

But technological innovation is only a part of the story; at least equally important is the development of smart business models based on joint responsibilities and fair allocation of revenues instead of on individual profit maximization. Complex modern supply chains are first and foremost characterized by the fact that many stakeholders are involved in shaping their ultimate manifestation, not only shippers and logistic service providers but also the financial sector and governmental agencies, and ultimately the customer. Such systems require adequate planning and control mechanisms, including distributed architectures, cloud computing solutions, cognitive computing and agent-based decision support systems. The recent attention for data driven models (big data analytics) marks an important further step towards full-blown automated decision architectures.

Multi-stakeholder systems aiming at cooperation between essentially autonomous companies require tools that basically draw on game-theoretical concepts. But the key idea - established in the Nash equilibrium theory - that players may have to give up their individual optimal solution in order to achieve an overall stable equilibrium solution is still hard to accept, in particular for private companies that were used to concentrate on their individual profits. This is perhaps the biggest hurdle to be overcome to arrive at sustainable logistics; it involves not only smart business solutions but more importantly a change of mind. and indeed trust in the value of collaboration.

A similar change of mind is requested to implement ideas of re-use of products or components, both via (electronic) second markets or directly from dismantling disposed products in closed loop supply chains, as an example of the circular economy. Also, the rising attention for sharing economy concepts (as e.g. in car sharing, cloud computing, music streaming) may have important consequences for supply chain design, planning and control in that the focus will at least partially switch from delivering products to delivering services.

Next issue: January 2018
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