Next Steps: Future of 21st

Century Logistics

Joe Pekny1

Reha Uzsoy2

Purdue UniversityWest Lafayette, IN 47907

http://www.purdue.edu/DiscoveryPark/logistics

1e-Enterprise Center at Discovery Park, School of Chemical Engineering2Laboratory for Extended Enterprises at Purdue, School of Industrial Engineering

OVERVIEW

• A little history…• The TDL sector in Indiana

– Status– Roles in economic development– Strengths and opportunities

• Purdue-CICP initiative in TDL and supply chain

• Future directions

A little history…

• The Indiana economy has been based on manufacturing for the last century, but has been affected by shifts in the global economy

• Industry, government and academia are concerned about deploying new technologies to drive continued economic growth

A little history…

• The Central Indiana Corporate partnership has commissioned studies of four main industry sectors– Advanced manufacturing– Life sciences– Information technology– Transportation, distribution and logistics

What is TDL?

• Traditionally viewed as the functions of storing, transporting goods

• Prevalent trends are towards ever greater integration with the rest of the supply chain

• Pervasive drive towards leveraging IT developments to better integrate, control the entire supply chain

• Strong trend towards collaborative solutions via partnering and outsourcing

What is TDL?

• Any realistic definition of TDL in today’s environment must take a view that encompasses the entire supply chain

• Production and distribution activities are becoming ever more closely integrated; does not make sense to consider them separately

• TDL = SCM on steroids!

Future of TDL

• Novel partnerships within the TDL sector– Railroads partnering with trucking to reduce cost,

improve service

• TDL providers assuming more value-adding roles– Customization, assembly, inventory management

• Total Situational Awareness in TDL– IT & management of complexity– Physical and information security

Future of TDL

• Novel partnerships outside the TDL sector– Outsourcing of services previously considered a

competitive advantage

• Opportunities in security and real-time tracking– Container shipping - smart, aware containers

• Exploitation of intelligent infrastructure– Highway sensing, GPS

• Ever tighter integration of the supply chain– GM Order to Delivery program– 60 days to 5!

Data drives the Future!

• Real-time data acquisition is constantly getting easier and cheaper– Wireless, smart pallets, highway sensing, GPS, cell-

phone location• Moving the data thus acquired around is also

getting easier and cheaper– Internet

• Increased visibility of both demand and supply– ERP at the industry sector level?

• Who leverages their data best, wins!

RF Integration -Manual PickingGood Technology Begets Opportunities

Bad Technology Begets CostsGene Long, 93% Fortune 500 unhappy, MARKET OPPORTUNITY

And so…?

• We cannot get here by merely doing what we have been doing better

• We cannot compete with the rest of the world on cost

• We have to compete by exploiting the new technologies to develop new capabilities

• We have to collaborate securely where it makes sense

Such as…

• Moving custom-grown human tissue– Currently no safe way of transporting it– Need to locate production close to demand

• Now suppose we figure out a way to do this– Can have large production facilities with

economies of scale– Changes the entire competitive landscape!

Growing new industries…

• A vibrant, creative network of TDL providers is crucial for startup companies

• By definition, they’re good at one thing• TDL is usually not that thing• Good TDL partners allow them to do their

thing profitably and grow

TDL in Indiana

• Two major studies:• Battelle Memorial Institute for Central Indiana

Corporate Patnership in 2001– Focused on Central Indiana

• Transport Flows in the State of Indiana: Commodity Database Development and Traffic Assignment , Phase 2, Bloomington, IN: Department of Geography and the Transportation Research Center, Indiana University, July 1997 (final report) , xii + 28

• State Port Authority (“organizational advantage” –Steve Sewell)

TDL in Central IndianaTDL in Central Indiana• 7.4% of Central Indiana Economy• 7.1% decline in TDL establishments in 95-01 - consolidation?• 9.8% increase in TDL employment for the same period

0%

5%

10%

15%

%Tot INEstablishments

1% 2% 4% 13%

%Tot Employees 4% 1% 2% 4%

Adv Manu Life Sci Info Tech TDL

TDL Outlook in Central IndianaTDL Outlook in Central IndianaWholesale Distribution of Durable Goods has the greatest share of the activity and employment—Out of 6,300 Establishments and 89,4234

employees in Central Indiana TDL in total.

TDL is made up of many small businesses

0%

10%

20%

30%

40%

50%

60%

% Establishments 6% 55% 20% 16% 3%

% Employees 7% 46% 19% 23% 4%

Warehousing/Storage

Wholesale Distr--Durable

Wholesale Distr--Non-Durable

Trucking/Courier Services

Air/Misc. Freight & Railroads

What is being transported?

• 19 categories presented in Value (millions) and Tonnage.– The 19 segregated into three Sub-categories:

• Lighter goods—These have more of an even ratio of value to weight.

• Less-Heavy Goods—These have a greater ratio of value to weight

• Heavy Goods—These have a high ratio of tonnage to value.

Lighter Goods

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Value (mill) 7795 15914 978 14811

Tons 553 1909 4567 2421

Apparel Electrical MachineryWaste & Scrap Material Basic

Textiles

Other Manufactured Prods

Less-Heavy StuffWith a High ValueValue to TonTon Ratio

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Value (mill) 10,363 9,504 34,401 9,549

Tons 4,572 1,023 6,731 7,679

Fabricated Metal Prods

Machinery, except electrical

Transportation Equipment

Other Group

Heavy Goodswith a High TonTon to ValueValue Ratio

-5,000

10,00015,00020,00025,00030,00035,00040,00045,00050,00055,00060,00065,000

Value (mill) 5,794 281 463 16,958 11,474 9,008 2,748 17,485 Tons 39,902 10,759 57,341 21,039 11,957 62,500 21,972 27,881

Farm Coal Non-Mtl

Food & Reltd

Chem &

Petrlm & Coal

Stone,Clay &

Primry Mtl

Harbor TransportSouthwind Maritime, Burns International, Clark Maritime

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TDL in the Indiana Economy

• Provides an essential service that creates an environment for other industries to compete successfully

• Advanced manufacturing, life sciences– Require novel TDL solutions to provide novel services

and products

• Technology-enabled TDL is a heavy user of IT – Drives growth in the IT sector as well

Strengths in Indiana

• Location and infrastructure– Major interstates, crossroads of America

• Extensive industrial base that is used to operating in demanding TDL environments– JIT logistics for the auto companies

• Two strong research universities• Extensive network of regional campuses

and community colleges

Needs in Indiana

• How to upgrade/reorient the existing workforce to the needs of a IT-driven, high value added TDL sector?

• How to create a TDL environment that will allow Indiana industry to thrive?

• Cannot compete on labor cost, so we need to compete on capabilities– Need to bring our technology to the table!

Purdue-CICP Initiative

• Objective is to develop a business plan for an organization that will institutionalize industry-university-government collaboration in the TDL arena

• Match existing capabilities of higher education institutions in the state to industry needs

• Identify and create capabilities that are not yet present– Where conomically justifiable!

Purdue-CICP Initiative

• One year joint study by Central Indiana Corporate Partnership and e-Enterprise Center at Discovery Park

• Involves several different groups at Purdue– Laboratory for Extended Enterprises at Purdue, Indiana

Database Center, CERIAS, SUFG

• Many different disciplines– Engineering, management, technology, computer

science

Discovery Parke-Enterprise Center

• Use of Computing to Support Economic Activity• Highly Interdisciplinary• Strong Engagement Network• 380+ Faculty Members• Interested in Advanced Manufacturing, Logistics, and their

Connection• Form Center for TDL

– Industry, Government, Universities– Strong integration with other research activities, industries– Combine ideas and optimize practices to get them executed

(partnerships, form companies, transfer to industry,…)– Develop process to embed innovation in TDL (technology,

regulation, infrastructure, practices)

A Federation of Researchhttp://www.purdue.edu/DiscoveryPark

• Biometric Testing & Evaluation Lab

• Center for Collaborative Manufacturing

• Center for Customer Driven Quality

• Center for e-Business Education and Research

• Center for Education and Research in Information Assurance and Security

• Center for Information Systems in Engineering

• Center for Technology Roadmapping

• Computer Integrated Process Operations Consortium

• Computing Research Institute• Dauch Center for Management

of Manufacturing Enterprises• Digital Enterprise Center• Indiana Center for Database

Systems• Information Technology at

Purdue• Laboratory for Extended

Enterprises at Purdue• Purdue e-Business Research

Center• Purdue International Center for

Entertainment Technology

Links from e-Center Web Site

Dialog with Stakeholders

• Partnership is key (Goodwin & Sewell)• Extensive advisory board actively involved

– Universities– Industry– Government

• Sponsored by CICP!• No One Good Idea Will Win The Day• Process for Generating, Promoting, Executing Good Ideas• Make Good Ideas Visible and Compelling• Realistic, Innovate, Be Optimistic, Focus on Strengths,

Minimize Weaknesses

Principles

• A viable institution will have to involve the entire higher education network in the state– Different institutions have different capabilities– Problems are plenty big for all of us!

• A viable institution will have to be able to identify needs and develop technology to address them– Exploit research work in the universities– Incentivize faculty to participate– Ongoing dialog with stakeholders

Principles

• The needs of the workforce must be addressed through a combination of degree programs and continuing education– Strong role for regional campuses and

community colleges– Framework for collaboration with research

universities to bring enhanced TDL capabilities to these institutions

Principles

• A successful center must provide a forum to permit many different stakeholders to interact in a mutually beneficial manner– Universities– Industry– State and local government

Areas of action

• Comprehensive Indiana TDL business plan• Economics

– What is the effect of improvements in the TDL sector on the state economy?

• Workforce– What types of skills are needed by whom, how

can they be supplied?

Areas of action

• Technology– What technologies could significantly enhace

the ability of the TDL sector to contribute to the state economy?

– Do these exist, or do we need to develop some of them?

– If we develop, what mechanisms for bringing to market?

Areas of action

• Infrastructure in its broadest sense– Roads, ports, etc– IT infrastructure - high speed Internet, wireless,

GPS, etc.– Legal - inventory tax, real estate development

statutes, leap frog legislation, etc.– Economic policies - e.g., 21st Century Fund,

etc.

Conclusions

• TDL is currently a significant portion of the economic activity in the state

• A strong, capable TDL sector is essential to economic growth

• Developments in IT will drastically change this industry

• Purdue and CICP collaborating to bring stakeholders together

How can you get involved?

• Make us aware of your interests, capabilities, and concerns– http://www.purdue.edu/DiscoveryPark/logistics– REGISTER ON WEBSITE!!!!!!!!