Challenges and Trends in Logistics: 2013

1. Challenges and Trends in Logistics: 2013 Dr. G. Don Taylor Charles O. Gordon Professor and Department Head, Grado Dept. of Industrial and Systems Engineering Virginia Tech

2. Presentation Overview Challenges and Trends in Logistics: 2013 • Economic Importance of Logistics & the Recent Recession • Commonalities/Differences in Challenges Between the US and the World • Understanding the Post Recession Logistics World • Research/Development Challenges

3. Current & Recent Trends in the Great Freight Recession Challenges and Trends in Logistics: 2013 • Large loss of jobs in logistics

4. Current & Recent Trends in the Great Freight Recession Challenges and Trends in Logistics: 2013 • Large loss of jobs in logistics • Large loss of revenue and share of GDP

5. U.S. Business Logistics Costs Challenges and Trends in Logistics: 2013 Trillions of US$ Source: CSCMP State of Logistics Report

6. Logistics as a Percentage of GDP Challenges and Trends in Logistics: 2013 Logistics Cost as a Percent of US GDP Source: CSCMP State of Logistics Report

7. Breakdown of Logistics Cost by Category Challenges and Trends in Logistics: 2013 Billions of US$ Source: CSCMP State of Logistics Report

8. Current & Recent Trends in the Great Freight Recession Challenges and Trends in Logistics: 2013 • Large loss of jobs in logistics • Large loss of revenue and share of GDP • Domestic and international freight transportation have been affected

9. International Trade by Mode at US Gateways Challenges and Trends in Logistics: 2013 Percentage Source: U.S. Dept. of Transportation

10. Logistics Around the World as a Percent of GDP Challenges and Trends in Logistics: 2013 Source: Boston Logistics Group and CSCMP

11. Current & Recent Trends in the Great Freight Recession Challenges and Trends in Logistics: 2013 • Large loss of jobs in logistics • Large loss of revenue and share of GDP • Domestic and international freight transportation have been affected • The game has changed significantly

12. Commonalities/Differences Between the US and the WorldStatistic U.S. World Challenges and Trends in Logistics: 2013 Population (M) 314 7,000 Pop Density (km2) 34 45 Urban (%) 82 50 Land Area (km2 ) 9.16M 150M Global GDP (%) 23.4 100 Source: Various

13. Commonalities/Differences Between the US and the WorldStatistic U.S. World Challenges and Trends in Logistics: 2013 Paved Road (km) 4.21M 18M Railways (km) 233K ≈1M Waterways (km) 41K 672K Pipelines (km) 0.79M 1.91M Airports (number) 14.9K 49K Source: Various

14. Understanding the Post-Recession World of Logistics: Five Trends Challenges and Trends in Logistics: 2013 • Reliance on imports and the emergence of China.

15. Understanding the Post-Recession World of Logistics: Five Trends Challenges and Trends in Logistics: 2013 • Reliance on imports and the emergence of China. • Energy price and availability.

16. World Oil Reserves by Region Challenges and Trends in Logistics: 2013 Source: Wikipedia

17. Understanding the Post-Recession World of Logistics: Five Trends Challenges and Trends in Logistics: 2013 • Reliance on imports and the emergence of China. • Energy price and availability. • Environmental concerns.

18. Understanding the Post-Recession World of Logistics: Five Trends Challenges and Trends in Logistics: 2013 • Reliance on imports and the emergence of China. • Energy price and availability. • Environmental concerns. • The continuing rise of the internet.

19. Understanding the Post-Recession World of Logistics: Five Trends Challenges and Trends in Logistics: 2013 • Reliance on imports and the emergence of China. • Energy price and availability. • Environmental concerns. • The continuing rise of the internet. • Governmental debt.

20. 2014 Looking Better, but not Great Challenges and Trends in Logistics: 2013 • U.S. Household debt at local minimum. • Investment picking up. • Logistics capacity is available in some modes. • Truck and intermodal rates continue to creep upward. • U.S. energy production is up.

21. Recently, Arguments Support ‘Near Sourcing’ Challenges and Trends in Logistics: 2013 • Wage increases in China makes US more competitive.

22. Recently, Arguments Support ‘Near Sourcing’ Challenges and Trends in Logistics: 2013 • Wage increases in China makes US more competitive. • Shipping costs on the rise.

23. Recently, Arguments Support ‘Near Sourcing’ Challenges and Trends in Logistics: 2013 • Wage increases in China makes US more competitive. • Shipping costs on the rise. • Air freight prices vulnerable to whims of the market.

24. What are the Grand Research/Development Challenges? Challenges and Trends in Logistics: 2013 • Make solar energy economical • Provide energy from fusion • Develop carbon sequestration methods • Manage the nitrogen cycle • Provide access to clean water • Restore and improve urban infrastructure • Advance health informatics • Engineer better medicines • Reverse-engineer the brain • Prevent nuclear terror • Secure cyberspace • Enhance virtual reality • Advance personalized learning • Engineer the tools of scientific discovery Source: US NAE

25. But I Like Richard Smalley’s Prioritized List Better Challenges and Trends in Logistics: 2013 • Energy • Water • Food • Environment • Poverty • Terrorism & War • Disease • Education • Democracy • Population Source: Richard E. Smalley Institute: Rice University

26. What are the Grand Research/Development Challenges in Logistics? Challenges and Trends in Logistics: 2013 • The need for innovation and efficiency gains.

27. What are the Grand Research/Development Challenges in Logistics? Challenges and Trends in Logistics: 2013 • The need for innovation and efficiency gains. • The need for innovation in niche areas.

28. What are the Grand Research/Development Challenges in Logistics? Challenges and Trends in Logistics: 2013 • The need for innovation and efficiency gains. • The need for innovation in niche areas. • The need to think big.

29. Montreuil’s Unsustainability Symptoms Challenges and Trends in Logistics: 2013 • We are shipping air and packaging • Empty travel is the norm rather than the exception • Truckers have become the modern cowboys • Products mostly sit idle, stored where unneeded, yet so often unavailable fast where needed • Production and storage facilities are poorly used • So many products are never sold, never used • Products do not reach those who need them the most • Products unnecessarily move, crisscrossing the world • Fast & reliable intermodal transport is still a dream or a joke • Getting products in and out of cities is a nightmare • Networks are neither secure nor robust • Smart automation & technology are hard to justify • Innovation is strangled

30. Montreuil’s Physical Internet Characteristics Challenges and Trends in Logistics: 2013 • Encapsulate merchandise in world-standard smart green modular PI containers. • Aim toward universal interconnectivity. • Evolve from material to PI container handling & storage systems. • Exploit smart networked containers embedding smart objects. • Evolve from point-to-point hub-and-spoke transport to distributed multi-segment intermodal transport. • Embrace a unified multi-tier conceptual framework. • Activate and exploit an open global supply web. • Design products fitting containers with minimal wasted space. • Minimize physical moves and storage by digitally transmitting knowledge and materializing objects as locally as possible. • Deploy open performance monitoring and capability certifications. • Prioritize webbed reliability and resilience of networks. • Stimulate business model innovation. • Enable open infrastructural innovation.

31. Summary Remarks Challenges and Trends in Logistics: 2013 • The global recession has fundamentally changed North American and world logistics. • New global players have emerged • Energy and environmental concerns will weigh heavily. • The internet and business connectivity will increase. • We cannot rely on government to fix our problems. • We will need to think differently, bigger, and smarter.