Supply Chain Matters is very pleased to feature the following guest blog commentary from Professor Yossi Sheffi, Director, MIT Center for Transportation & Logistics.  Professor Sheffi’s thought leadership is well recognized within the global supply chain management community through his ongoing academic and thought leadership contributions both at MIT and the community at large. The guest posting summarizes Yossi’s conclusions drawn from his latest book.

Supply Chain Matters has found this book to be insightful for articulating the why, when and how of successful logistics cluster and the continued role they will play in global supply chain logistics deployment and postponement strategies.

Logistics clusters, agglomerations of firms that come together to share logistics expertise and know-how, are well established nodes in global supply chains. Yet relatively little is known about why they are successful and their broader impact on economic growth.

My new book, Logistics Clusters: Delivering Value and Driving Growth (MIT Press, October 2012), aims to fill this information gap and provide insights into the future role of these entities.

Logistics clusters operate in almost every part of the world usually near to consumer markets or in strategic locations such as ports and airports. They have thrived because the model is self-sustaining. The high volumes of freight traffic they generate make it possible to capture economies of scale and scope. For example, users can deploy large-scale conveyances that improve vehicle utilization. These efficiencies lower transportation costs and raise service levels; improvements that attract more cluster tenants, which in turn bring further efficiencies within reach. Other examples of this feedback loop are detailed in the book.

A key benefit of logistics clusters is their ability to create a wide variety of employment opportunities that are not reliant on any one industry and are difficult to offshore. There are blue-collar and white-collar jobs, and work related to value-added services, including, for example, returns and repair management which means jobs for technicians. Furthermore, the late-stage customization work carried out in many clusters must be located in close proximity to end markets, effectively removing the offshoring option.

These activities have transformed logistics clusters into job creators. The Memphis International Airport in the U.S. supports 220,000 jobs in the local economy, 95% of which are tied to cargo operations, for example. Just as important, the low-cost/ high service environment in these communities attracts manufacturers that value these advantages, adding to the job creation in the region.

Logistics clusters will continue to expand in line with globalization. However, as I argue in the book, the general economic benefits they deliver justify more investment in these communities.