Finance and accounting free essays: Review of Logistics Clusters by Yossi Sheffi
Review of Logistics Clusters by Yossi Sheffi
The book titled Logistics Clusters: Delivering Value and Driving Growth authored by Yossi Sheffi contains a description of logistics clusters, how they row, what they need to grow and their impacts. As Sheffi explains, logistics cluster is a group of businesses that are located in the same geographical area that are involved in the distribution of goods and services. For instance, a logistics cluster can comprise manufacturers, suppliers, forwarders, transportation carriers, outsourcing firms, distribution of middle-men and retailers, campuses and office parks. As such, Sheffi defines a logistics cluster as a region with high concentration of business and logistics activities relative to local economy or population. A logistic cluster can be compact. For instance, a logistics cluster can be concentrated in a particular town within a country. Examples of such logistic clusters are Sao Paulo in Brazil, Duisburg in Germany, Zaragoza in Spain, Rotterdam in Netherlands and Chongqing in China. Also, a logistics cluster can be diffuse (Sheffi, 2012). For instance, the logistics cluster in Panama has spread throughout the country. The book titled Logistics Clusters contains ten chapters. In the first chapter, Sheffi gives a description of companies that have contributed to the development of logistic clusters. In the second chapter, he explains the technology and art of economic clustering. The third chapter explores the geography of clusters, chapter 4 examines the operational advantages of the clusters and chapter five explains the real benefits of adding value in a logistic cluster. Chapter 6 describes the infrastructure that makes up a logistic structure, chapter 7 explains the role played by the government in the development of the clusters and chapter eight focuses on the impact of the clusters on human capital and education. Chapter 9 addresses the regional impact of the logistics clusters and the last chapter contains a reflection of the factors that can lead to the formation of new logistics clusters. This paper addresses three concepts explained by Sheffi, namely how the logistic clusters develop, the benefits and advantages of the clusters and the impacts of the clusters.
Sheffi begins with an illustration that makes the reader interested in reading the rest of the book. He gives a practical example of how Saragosa’s logistics cluster was formed. Saragosa’s logistics cluster is located in the city of Zaragoza, and it is the largest single logistics cluster in Europe. As Sheffi explained, Saragosa’s logistics cluster forms region Aregon logistics cluster together with other seven logistics structures. As Sheffi explained, the park covers an area of 1,200 ha and it has almost 800,000 people. Sheffi describes two firms that have contributed to the formation of Saragosa’s logistics cluster, namely Caladero and Inditex. Caladero is the largest firm that sells frozen foods in retail in Spain. Inditex is the parent company of Zara, one of the largest retailers in Spain (Sheffi, 2012). As Sheffi explained, the strategic location of Zaragoza makes it suitable and attractive to companies involved in logistics activities. From Zaragoza, there are well developed highway roads and railroads that allow for quick access to major cities and towns in Spain, such as Bilbao, Barcelona, Tarragona, Madrid and Valencia. As Sheffi noted, Zaragoza city has an inland airport that is easily accessible to those cities and towns. Sheffi noted that firms such as Zara opt for Zaragoza as their distribution location since the town is near an airport and the firm can easily access the surrounding cities and firms easily. Thus, Sheffi sought to explain that logistics clusters are formed in strategic locations where logistics firms can easily access sources of products and the targeted areas of distribution (Sheffi, 2012).
In addition, Sheffi explained the factors that are necessary for effective development of the logistics clusters. According to Sheffi, the growth of a logistics cluster is supported by the development of physical, energy, informational and financial infrastructure. Examples of the components of the physical infrastructure needed to support logistics clusters are airports, roads, land improvements, buildings and their management. In cases where logistics involve transportation of heavy products, oceans, seas, rivers and harbors may be necessary (Sheffi, 2012). As Sheffi noted, well developed operations and networks of financial transactions are necessary. For instance, financial institutions are necessary for effective development of the logistics clusters. Information infrastructure consists of channel for exchange of information. For instance, there is a need for communication channels that allow logistics companies to send business documents to clients easily and with convenient when necessary. The energy infrastructure is made up of sources of energy needed for effective operation of the logistics companies. For instance, there is a need for adequate supply of fuel for vehicles are airplanes used by the logistics firms (Sheffi, 2012).
Sheffi also acknowledges the role of the government in facilitating the formation and development of logistics structures. According to Sheffi, government authorities in most cases contribute through investing in logistics assets, transport and communication facilities’ such as warehouses, intermodal terminals and logistics parks. As Sheffi explained, the development of most expensive logistics assets, such as railroads, land and airports, require the support of the government authorities (Sheffi, 2012). Also, such logistic assets are controlled by the regulations of the government authorities. Government authorities control the use of the logistics assets, which is necessary for effective urban planning. Also, governments support the development of the logistics clusters through supporting the development of other businesses. For instance, governments facilitate the development of banking institutions in areas where logistics institutions develop. Last, governments support the growth of logistics clusters through providing incentives that support the development of workforce, such as education. Also, governments influence the development of logistics clusters trough tax policies, trade regulations, environmental policies and immigration policies, among others forms of regulation. In some cases, the logistic clusters are entirely designed by government authorities. For instance, Sheffi notes that the logistics cluster of Aragon was designed by the government of Aragon. The government planners discouraged the development of logistics clusters in other parts of Spain, which would end up being less effective than the logistics cluster of Aragon (Sheffi, 2012).
Still focusing on the development of logistics clusters, sheffi reflected on the dynamics that may contribute to the formation of new ones, changes in the existing clusters and declines in the clusters that have already developed. For instance, sheffi explained that the emergence of new markets can lead to the development of new clusters. The factors that can contribute to the decline of the clusters that have already developed include regulation such as local laws, import duties and quotas, protectionist anti-trade policies and high prices of energy (Sheffi, 2012). Sheffi summarizes six factors that are associated with the development of effective logistics clusters, namely favorable geographical region, unity of purpose and spirit of cooperation, the presence of value-added services, research and innovation, education institutions and adequate government support. Thus, Sheffi tends to give much focus on the formation and development of the logistics clusters in Logistics Clusters.
The second most remarkable concept addressed by Sheffi in the book is about the benefits or advantages of the logistics clusters. He explains that the logistics clusters facilitate the development of the efficiency of storage and transport systems in the areas where they are developed and beyond. Also, they contribute to the development of outsourcing services and globalization of trade. Sheffi identifies two operational advantages of the logistics clusters. According to Sheffi, the clusters facilitate a reduction of costs as different firms work together closely. Also, working together helps to enhance the efficiency and quality of services within logistics firms. As such, the firms that comprise a logistics cluster enhance each other’s performance (Sheffi 2012). Sheffi explained that the advantages of forming logistics clusters include enhancing value-added activities such as labeling, packaging, assembly operations and preparation of products for retail sale. Since firms in a logistics cluster are close, they can delay the delivery of products to the time the products are needed by the recipients within the same cluster. Delaying the products gives the manufacturers ample time for customization of the products. Thus, sheffi gives an elaborate explanation of the advantages of the logistics clusters.
Last, Sheffi describes the impacts of the logistics clusters. He explains that the logistics structures create a lot of jobs both directly and indirectly. Sheffi gives an illustration of the Saragosa’s logistics cluster. Sheffi noted that by 2011, the Saragosa’s logistics cluster had employed approximately 10,000 employees directly. Sheffi noted that approximately 55,000 employees were working at the Rotterdam airport. Also, Sheffi found out that approximately 90,000 additional jobs in the Netherlands were tied to the airport. Sheffi noted further that approximately 220,000 jobs in Memphis were tied to airport, and around 95 percent of those jobs were related to cargo operations. In addition to supporting creation of jobs, Sheffi explained that logistics clusters facilitate the development of economies. For instance, Sheffi noted that the development of logistics clusters industry in Europe in 2007 was 2.5 times greater than the rate of growth of the overall economy of Europe. Last, Sheffi noted that the growth of logistics clusters has been facilitating the expansion of middle class especially in the places where employees working in logistics firms are provided with adequate income.
Overall, Logistics Clusters authored by Sheffi is very informative and it contains very important information about logistics and how logistics clusters are formed. The content of the book enables the reader to understand the factors that contribute to the development of logistics clusters, how the clusters develop from the beginning, their advantages and their impacts in the regions where they are formed and beyond. Sheffi adopted a simple writing style that makes the reader to understand the content of the book easily. Also, each chapter seems to address a specific concept or issue. This enhances the flow of the information contained in the text. The strength of the content of the text is enhanced by Sheffi’s use of practical examples to support his argument and ideas. Thus, Logistic Clusters is a good book that every person interested in logistics should read.
Sheffi, Y. (2012). Logistics Clusters: Delivering Value and Driving Growth. London, England:
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