Policy goals for mega-cities, sustainable development, lifestyle change and technology development require a new focus on efficiency, personalisation, simplicity and resilience. This was the message from Derek Halden at the inaugural lecture to students of Logistics and Transport in Wroclaw, Poland. Understanding how to offer customers simpler more dependable services by managing efficiency and targeting investment must be central to future delivery.
On 4th October 2014 Derek told the students:
“I am honoured to have the opportunity to speak today. I am sorry I don’t speak Polish but hopefully I can communicate in English using the language of international logistics and transport. I first came to know your university through the Chartered Institute of Logistics and Transport which like this university has an international focus recognising the needs of our global industry. Through CILT in Scotland I have made presentations to students, but never in such grand surroundings, or to such an internationally connected University. I am grateful for the privilege.
I remember attending a very similar event when I started my own studies more than 30 years ago in Civil Engineering at Aberdeen University. Amazingly I realised that I still remembered something that was said at that event – so I will start by recalling what I learned all those years ago. Aberdeen claims to be the first university where courses in medicine were offered, and the speeches to new students were about the role of different professions in society. I was studying civil engineering and the speaker said that civil engineering must surely be the world’s oldest profession as the creation of the world was a massive civil engineering enterprise – but perhaps there were also lawyers to help navigate the darkness and chaos. The point I took from all of this was that although none of the great professions actually existed when the world was being formed, the tasks we perform are central to life as we know it. This message is always relevant. Our clever technologies, skills and processes in logistics and transport will only succeed when they are embedded in the wider ecosystem of this small planet. So I want to talk today about a few things I have learned about these systems.
When I was a student I was taught how to predict transport needs, but what I found was that traditional, linear forms of analysis repeatedly gave the wrong forecasts. In our complex volatile world there is always a need to manage uncertainty. We may build very clever analytical tools to help us to understand and represent systems but we must always remember that the outputs are only as good as the data inputs. Some of the most important parameters in the system cannot yet be modelled – political instability for example is one uncertain parameter that affects us all.
Today we work in an industry which needs to deliver for people and businesses within a complex interconnected world of business and social networks, electronic and information networks, and administrative and governance systems. Our ability to manage logistics and transport depends on our influence within these wider systems – not just within our narrow sphere. We therefore need skills, not just in traditional areas like management, technology, communications, and planning, but in weaving these capabilities through the different social and governance systems around the world.
The impressive international and business contacts made possible through studying at this international University means you should be exceptionally well placed for the future. Make sure you manage your contacts book well during your studies – you may find you need these contacts in the future.
Some people say it is who you know rather than what you know that matters. I argue this is a false choice. Knowledge of things is not separate from knowledge of people or places. The fast growing knowledge economy depends on being able to apply the explosion of information we see today into activities and projects of value.
Up until around 200 years ago the value of land and labour underpinned wealth creation in the economy. Rail transport systems from the start of the 19th century helped to enable the growth of new industries with economies of scale in production and consumption. Today electronic communications are enabling an explosion of information that will have an equally a profound impact in the 21st century. We sometimes call this the knowledge economy.
During the 19th and 20th centuries transport growth was closely linked to the production and consumption economies. These transport needs still dominate the thinking of many in our industry – not least because they are so important for today’s financial viability. But if we project past trends into the future we see chronic resource shortages, conflict, inequality, and ultimately collapse. Short term growth in demand for logistics and transport should never be at the price of long term failure.
These predictions lead some in our industry to be gloomy about the future, but I am optimistic. I don’t think the future will follow past trends – any more than it ever has done. In the 19th century projecting trends in land and labour would have not told us much about how logistics and transport would change in the 19th and 20th centuries. It would not even have told us much about land values – because the paradigm changed. Projecting production and consumption thinking to the knowledge economy does not make much sense – but it is still common in practice. We all hear daily news bulletins talking about how things will be in 2050 – with little recognition of the potential to change to much smarter more successful approaches.
Logistics and transport is already evolving to meet the needs of this smarter economy – constant improvement is in the DNA of all successful ecosystems. Rather than predict a catastrophe and deliver it by default, we can organise transport supply and demand which supports the emerging possibilities of a better networked economy.
Just as at the start of the 19th century people did not know how economies of production and consumption would evolve, so today we can only see glimpses of the bright new future we are starting to create. Informed connected people and places using integrated energy and transport systems are already starting to deliver better efficiency, personalisation, simplicity and resilience. Some visions of the future describe these issues in terms of lifestyle changes, the development of mega-cities, or improvements in access, information, and flexibility but changes in efficiency, personalisation, simplicity and resilience explain the practical changes we make.
The rate of change is rapid. Just 20 years ago most businesses would have responded to customer demand by ordering a few more trucks or running more bus services. Today’s transport is much smarter. We have seen huge efficiency benefits through better optimisation of supply chains to reduce warehousing and stock holding costs for business. We are also starting to see even greater benefits through better integration within logistics and transport and with customers and suppliers. New business models in the economy of shared benefits have been emerging – Ebay does not need warehouses at all.
Vertical integration – that is collaborating with customers and suppliers – is enabling travel to be scheduled differently to make better use of the capacity within the system. Horizontal integration – that is with providers at the same level in the supply chain – is enabling providers to share passengers or freight.
One challenge has been to create incentives with sufficient power to raise benchmarks in the industry. In Scotland we have recently seen the effect of incentives from a programme of major events during 2014. London saw a similar effect at the 2012 Olympic Games and CILT’s review of the long term effects is a good read. When transport networks are faced with accommodating large short term increases in demand, change becomes necessary. Two years after the London Olympics, transport efficiency retains much of the smarter working achieved for the event. We need to plan more incentives like this.
Some of the leading practice to manage the incentives for change comes through offering more personalised customised services. You cannot change everyone all of the time but you can always change some people some of the time.
We have been working with citizens in the UK to develop personal and business travel accounts which allow us to target benefits at the people and businesses who are best able to reduce pressure transport systems. Customising services enables large reductions in the demand for long distance transport through more local value chains. In our work to regenerate struggling towns we have found that the cost of the incentives is less than a tenth of the immediate commercial benefits which can be delivered as a result. Instead of offering more transport we grow our businesses by offering less transport and instead add value in other ways.
Added value services such as packaging for products, accommodation for people, and other bundled offers have the potential to complete what we call the circular economy where zero waste is managed as a service. If we think about the intensity of global dialogue on sustainable development over the last 20 years, and reflect that logistics and transport has provided many of the most practical business models for delivery, then we understand the scale of the opportunity open to our profession. Transport has long been recognised as the glue that holds the economy together. The sector is increasingly building sustainability from the bottom up.
One of the keys to this future success will be simplicity. The world has become incredibly complex. People don’t believe that they can make a difference and want a simpler world where they feel more valued. People crave simplicity where they can trust more people and businesses more of the time.
One response to complexity has been protectionism and associated with this has been a rise in nationalism. In Scotland we recently had a referendum about political independence. For some this was about narrow protection of local assets like oil, whisky, fish or even untapped renewable energy assets. However for most this was part of a negotiation about how to rebalance political power between Brussels, London and Edinburgh. Every part of Europe has similar issues about the relative importance of local, regional, national and international governance, but what made the Scottish debate so interesting was that the big challenges facing the world became the hot topics in coffee shops, offices and community organisations. Whatever the outcome of the ongoing negotiations between Edinburgh, London and Brussels one thing is certain; any political changes which take place will be no more important than the benefits of a more informed population. Simplicity has been delivered through a process of public engagement to distil big complex problems down to the level of individual impacts in local communities.
In logistics and transport we already understand local communities very well but we don’t yet use the knowledge as we could. The postman delivering parcels, and bus or taxi drivers have the local knowledge. Projects I have personally found most rewarding have been working with these transport operators and with local shops, schools and hospitals helping them to solve their individual problems. With colleagues I wrote a report last year where we added up the effects of local projects we had supported. The analysis suggested that in the first decade of the 21st century the collective impacts of the small simple projects, have been greater than the large better funded infrastructure investment which has been the focus of politicians. Once we make things simpler for people we don’t just get the small projects right but we build in public support for better big investment decisions.
As our world faces new challenges some argue that we need a shift away from efficiency maximisation in our industry to vulnerability mitigation and resilience. Redundant systems with more regional and local supply chains may be better adapted to troubled times but could reverse some of the efficiency gains seen in recent years. I am not sure that the conflicts between efficiency and resilience are always as great as they are made out to be. The UK access to services partnerships have shown us how to manage the trade-offs to deliver resilience alongside efficiency, personalisation, and simplicity. Access to fresh food partnerships have brought together supermarkets with communities, local authorities and food producers and the outcomes have included local community food production supporting more resilient and more profitable supply chains.
I hope that I have given you a flavour of the ways that logistics and transport is working with the wider ecosystem. We have the potential to help deliver these visions of a better world. We must also reflect that logistics and transport continues to be the sector of the economy with the fastest growing greenhouse gas emissions so there is much to do.
We need more skilled professionals. We live in interesting but challenging times, particularly in the field of logistics and transport. I am sure that if you aim high then you will achieve much. Thank you again for the privilege of sharing my thoughts with you.”