In early 2002, I was invited to give a keynote address at a logistics conference in Zaragoza, Spain. The invitation came from Emilio Larodé, a professor at the University of Zaragoza, who got in touch with me as a result of the recommendation of my MIT colleague, Ralph Gakenheimer, the well-known urban planning guru. Before I could respond, however, I first had to locate Zaragoza on a map. I had never been there nor had I heard of this modest city in the middle of Spain.
During my visit, I learned about the government’s plan to develop a large logistics park next to the city, as well as about the quality of the local food and wine (“típico típico” as my hosts would declare with pride about every new dish and bottle). Zaragoza is not a port, not a large city, and not a major airport—yet I felt that the project had a good chance to succeed. The city is roughly equidistant from Spain’s four largest cities (Madrid, Barcelona, Valencia, and Bilbao), as well as from the Atlantic and the Mediterranean. Furthermore, the airport has the capacity for large cargo airplanes. Just as important, the government’s plans included an intermodal yard, which would be key to a “dry port.” At the same time, the central government was planning for a high-speed train connecting Madrid and Barcelona through Zaragoza. The third section of chapter 1 tells the full story of how the Zaragoza logistics park came to be.
My discussions with the Aragónese government focused on how to distinguish the planned park from others in Spain and elsewhere in Europe. I suggested the development of an international academic center for research and graduate education in logistics and supply chain management. Because logistics is, by its nature, an international profession, I long thought that the MIT Center for Transportation and Logistics should have “outposts” around the world, working with local industry. Instead of placing the new center on the campus of the University of Zaragoza, we could “build the university into the laboratory” by placing the new Zaragoza Logistics Center within the logistics park. Such a location would foster close cooperation among companies, students, and researchers.
While the Aragónese Government pushed ahead with the development of the logistics park, known as PLAZA (Plataforma Logística de Zaragoza), I heard nothing for a few months about the academic center idea. In late 2002, however, Alan Cuenca and Manuel Lopez, representing Aragón’s finance ministry and education ministry, respectively, came to visit me in Cambridge, England, where I was spending a sabbatical year. During an afternoon discussion, on the 6th floor of the Judge Business School in the old Addenbrooke’s Hospital building, they excitedly brought the message that the Aragón Government was ready to move ahead.
The story of the Zaragoza Logistics Center (ZLC) is laid out in more detail in chapter 8, including its academic success. This meeting in Cambridge, however, marked the beginning of a fruitful collaboration, now entering its second decade among MIT, the Aragónese Government, two local banks, PLAZA, and the University of Zaragoza. It was also the start of my personal involvement with the PLAZA project and the community of Zaragoza, and of strong friendships made in the process. I came to appreciate the foresight, vision, and execution capabilities of the government of the autonomous Spanish community of Aragón. More cities, regions, and states should be this fortunate. Learning from the success of the ZLC, MIT has opened similar logistics research and education centers in Bogota and Kuala Lumpur, combining these centers in the Supply Chain and Logistics Excellence (SCALE) global network.
It was the economic success of PLAZA, however, that motivated the research that ultimately led to this book. I wanted to understand why PLAZA, as a greenfield development, in small city with a limited industrial base, was so successful. My curiosity led me to investigate logistics clusters worldwide, a subject that has received scant attention in the economic literature. I spent several years visiting logistics clusters in Rotterdam, Panama, Singapore, Saõ Paulo, Los Angeles, Chicago, Memphis, Louisville, Dallas, and many other regions. These visits were spent observing activities, collecting data, and interviewing executives, government officials, consultants, and academics.
When I began to look into logistics clusters, I intended simply to tell their stories and shed light on their development. These clusters exhibit certain characteristics and offer certain advantages that are not common to the more frequently discussed industrial agglomerations, such as the geographical concentration of biotechnology firms in Cambridge, Massachusetts or of financial services companies in Manhattan, New York. Chapter 2 offers a new twist on the general industrial clusters literature by comparing the concentration of artists and art shops in Renaissance Florence to Silicon Valley’s array of information technology companies and entrepreneurs. Chapter 3 delves into four logistics clusters—the Netherlands, Singapore, Panama, and Memphis—outlining some of their history and characteristics and sharpening the definition of the term. In addition to the mechanisms that feed the development of any type of industrial cluster, chapter 4 shows how the economics of transportation add to the positive feedback loop that makes logistics clusters grow. Logistics clusters also generate other industrial activities, and chapter 5 outlines many of the value-added activities that are economical to perform on products “while they are there.”
Chapter 6 describes the infrastructure components that are the building blocks of every logistics cluster, and chapter 7 highlights the role of governments in developing and nurturing them. This role includes not only the financing of long-lived investments but also regulatory regime and trade policy. While logistics is sometimes thought of as a profession of “moving boxes,” modern supply chain management involves sophisticated processes, complex machinery, and advanced information and communications technology. Thus, chapter 8 describes various levels of educational institutions, which are an integral part of many logistics clusters.
As my research continued, I realized that logistics clusters offer important economic opportunities in today’s environment. Chapter 9 brings together many of their specific advantages: (i) most logistics jobs are not “offshorable”—distribution must be performed locally as a result of the economics of transportation; (ii) late-stage product customizations are best performed locally, because postponement allows for timely response to demand, leading to further economic activity in logistics clusters; (iii) logistics clusters attract other industries, such as manufacturing, which values the low transportation costs and high levels of service found in such clusters; (iv) while high-technology clusters offer employment opportunities to engineers and scientists, logistics clusters offer opportunities to many unskilled and less-educated workers; (v) logistics companies value front-line experience and tend to “promote from within,” enabling low-skill, entry-level workers to achieve middle-class and even executive wages; and (vi) logistics services feed multiple industries, making the region less vulnerable to specific industry downturns.
Chapter 10 describes the global role of logistics clusters and their efforts to become more environmentally sustainable. It also examines various elements that make logistic clusters successful or unsuccessful.
This book was based, in large part, on primary research, including interviews all over the world. As a result I owe deep thanks to almost two hundred people who gave their time generously, provided data, and pointed me in new directions. Without them this book would not have been possible.
The list of individuals who helped with this research effort is given at the end of the book. At this juncture, however, I would like to thank a few people who helped directly with the research and the writing. First and foremost these include the talented and friendly Andrea and Dana Meyer of Working Knowledge, who were instrumental in helping develop the concepts, as well contributing to the research and ensuring that the results were presented in readable English; Jonathan Hayes, who helped with the initial interviews in Spain; Liliana Rivera, my PhD student at MIT who helped me (with limited success) think like an economist; Dan Dolgin, who edited and made numerous suggestions, enhancing the manuscript; and Jonathan Sheffi, my able son, who kept insisting on clear writing.
I also would like to thank my colleagues at the MIT Center for Transportation and Logistics: Chris Caplice, Jim Rice, Edgar Blanco, Jarrod Goentzel, Mahender Singh, Bruce Arntzen, and Roberto Perez-Franco for their support and comradeship. A finer group of supply chain management professionals is difficult to find. Finally, I would like to thank my wife of over 43 years, Anat. I cannot imagine a better mate to go through life with. This book is dedicated to her.