Logistics Clusters by Yossi Sheffi (review)

Planning to deliver goods and services to users is nothing new. Planning to do so efficiently, collaboratively, and with long-term goals in mind is, however, a much newer phenomenon. Sheffi introduces the reader to the concept of a logistic cluster, describes what makes them successful, and details the benefits of logistics clusters. This book has value for anyone involved in planning distribution strategy, outlining supply chain education requirements, and considering the growth of logistics clusters. In addition to outlining benefits of clusters, the book is full of fun facts and trivia about the logistics industry, such as (1) most automobiles manufactured outside of Europe arrive in Rotterdam for value-added services before going to the destination country—even if that means a second sea journey for those autos bound for Great Britain, and (2) UPS spends more on information and communications technology yearly than it does for vehicles.

Logistics clusters are “geographically concentrated sets of logistics-related business activities.” These clusters typically result in added value for the companies utilizing the services and, as the cluster develops, includes additional services such as diagnostics and repairs as well as returns management. Logistics clusters can grow organically, much like those areas around Memphis and Louisville, the hubs for FedEx and UPS that also happened to be the catalysts for the genesis of their respective hubs. Alternatively, they can be developed with careful planning, collaboration and commitment, like PLAZA (Plataforma de Logistica de Zaragoza) in Zargoza, Spain, that came to life about 10 years ago. PLAZA handles everything from fish caught off the coast of Namibia to the latest fashion trends for Zara. The creation of PLAZA is also the result of significant support and investment from local and regional government entities, and the book details the growth of PLAZA as well as key points of success and benefits of logistics clusters.

As in real estate, location, location, location is a key for the success of a logistics cluster. Being geographically located with easy access to multiple modes of transport can increase speed to market, enhance competitiveness, and increase the diversity of industries and business types that can be supported. PLAZA did not start out with significant infrastructure—it was created on farmland—but had the support and appropriate intervention of government in order to build infrastructure, not just buildings to house logistics activities, but all of the necessary support services such as technology, electricity, and improved roads.

In addition to infrastructure and geography, appropriate educational resources can help logistics clusters grow and thrive, providing opportunities for continuous improvement within the cluster, as well as additional opportunities for employee growth. Innovative collaborative education agreements include a summer PhD program at PLAZA and a multilevel logistics education program being developed in Memphis with the support of the Department of Labor and the National Science Foundation. Moreover, the University of Memphis has been engaged with supply chain management for some time. Throughout the book, factors for cluster success include having customers in multiple industries to level out activity seasonality and cyclical variation to high levels of adaptability to meet the needs of a broad range of customer demands.

Sheffi points out that logistics clusters can provide a range of benefits. The sheer size of many clusters can bring significant price competition in transportation due to the consistent volume of freight available. From a local socioeconomic standpoint, employment rates and education levels can be improved together, bringing about a clear vitality. Sustainability continues to be an evolving issue as the “Not In My Back Yard” (NIMBY) pain may be difficult for some areas to overcome, particularly if the development of the logistics cluster is perceived to bring negative environmental impacts. On a broader scale, however, the consolidation of logistical activities can prove to have important global environmental benefits such as a great incubator for improved green transportation technology and a trial ground for more fuel efficient vehicles.

While it is difficult to predict the future success of any single...