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8. Education and Human Capital

Published onMar 26, 2020
8. Education and Human Capital
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Logistics professions span a range of skill levels and specialties, including equipment operators and mechanics, inventory managers, supply chain managers, information systems professionals, and distribution executives. To supplement workforce recruitment and on-the-job training, many logistics clusters attract, develop, or partner with educational institutions for vocational, undergraduate, postgraduate, and professional education.

Leading logistics clusters also support research and development institutions, which are set either as independent organizations, or in conjunction with educational institutions. A cluster provides a rich environment for new knowledge creation because cluster companies can provide data, experience, and problem framing that anchor logistics research in real world issues. The research’s outcomes can then give the participating companies a competitive edge by leading to better logistics equipment, processes, and services.

Both research and education contribute to the attractiveness of a cluster. In fact, almost all business plans to develop or invest in logistics activities highlight the availability of academic institutions and training facilities. For example, the Banner Center 2011 report on the logistics industry in Florida devotes over 20 percent of the document to educational issues;1 the supply chain “pitch” of Lansing, Michigan, touts “the expertise of Michigan State University’s internationally known supply chain management program”2; and Conexus, Indiana, states that “Indiana must do a better job preparing the next generation of manufacturing and logistics workers. Today’s jobs aren’t about standing at assembly lines—they’re about running computerized equipment and robotic systems, about teamwork and problem-solving.”3

Vocational Education

Although warehouse work seems like a low-skill vocation, modern-day logistics companies have little use for untrained labor. Safe and effective use of the automated equipment that handles goods requires professional workers. The increasing use of technology to track and manage all movements of goods requires even more skills. A large logistics park may need thousands or even tens of thousands of workers. In fact, creating a single large distribution center might call for hiring 1,000 workers. Logistics clusters need vocational education resources to supply all these workers. These vocational education skills include materials handling, conveyance operations, conveyance maintenance, and value-added activities performed on the goods passing through the logistics networks.

Getting Good Goods-Handlers

The AllianceTexas logistics park alone employs 31,000 people at more than 290 companies,4 which does not include the companies and employment in the area surrounding the park. To help ensure a steady supply of logistics workers, the developer recruited a local community college to create a training center within the cluster. Tarrant County College Corporate Training Center trains people to become foundation-level certified logistics associates (CLA) and midlevel certified logistics technicians (CLT).5 The comprehensive training program includes industry-defined standards, online and classroom courseware, textbooks, instructor training, assessments, and credentials. Certifications such as CLA and CLT provide a uniform skills base so that hiring companies know the capabilities of those they hire.6 “This certification will increase the value of those who complete the training,” said Kay Lee, senior manager of Tarrant County College Corporate Services. “Alliance companies will benefit by having highly trained logistics professionals, which will improve efficiency and quality control at their facilities.”7

Training programs like Tarrant’s seek to both raise the income potential of less-skilled workers in the local area and improve the labor supply for AllianceTexas. “This project has created a true career pipeline for dislocated workers who are changing professions, students looking for careers in an ever-expanding industry, and veterans who are transitioning from military to civilian life,” said Sal Adamski, business services manager of Workforce Solutions of Tarrant County.8

On a visit to AllianceTexas on a hot July day, the discussion turned to the training of logistics operators. Sitting around the table in the Spartan office attached to the cavernous LEGO distribution center were Julie Bianchi, director of LEGO’s Distribution America; Greg Kadesch, Exel’s director of operations for Contract Logistics—Americas; and Steve Boecking, vice president of Hillwood Properties, the company that developed AllianceTexas Logistics Park. After discussing the human resources needs of several of the companies in the park, Steve Boecking pointed out that Alliance extended the training program to reach more people. “We’re taking this into the high schools, so when the high school kids graduate, if they don’t go to college they can go into the warehouses to work. This will give them exposure to the workplace and start to increase the size of the workforce,” he explained.

The Alliance CLA/CLT training program also illustrates the multilateral partnership nature of concerted training activities in logistics clusters. Seven partners contributed to the development of the Alliance training program: the Manufacturing Skill Standards Council, the Texas Manufacturing Assistance Center, Workforce Solutions for North Central Texas, Workforce Solutions of Tarrant County, Tarrant County College, the North Texas Commission, and the Alliance Global Logistics Hub/Hillwood.9 Companies in the Alliance cluster helped to define the program and agreed to guarantee job interviews for new certificate holders. Federal dollars from the US Department of Labor paid for the training. Thus business, industry bodies, local economic development agencies, educators, and the federal government all had a hand in creating the program.

The CLA and CLT programs at Alliance are part of a broader menu of courses designed to support the educational needs of the Alliance cluster. Tarrant County College offers other courses to the businesses in Alliance, such as technical skills, computer skills, management skills, and communication skills.10 In fact, Tarrant County College will even train people to become CLA/CLT instructors themselves.11 This train-the-trainer strategy helps spread the knowledge into the cluster and means that cluster companies can create in-house training programs for CLA/CLT.

Training can also go beyond general logistics skills to include specialized skills. Some products—such as foods, pharmaceuticals, medical devices, and hazardous materials—require special handling because of regulatory or cultural requirements. For example, to attract more business, Singapore’s Coolport trained its workers to handle Halal-certified perishables (useful for serving the large Muslim populations in neighboring Malaysia and Indonesia) and to get certificates for Good Distribution Practice for Medical Devices and for Hazard Analysis and Critical Control Points.12

Drivers Wanted: Training for Equipment Operations

Many entry-level jobs in logistics require operating, servicing, loading/unloading and directing expensive, potentially dangerous conveyances and large materials-handling and transportation assets such as forklifts, trucks, cranes, ships, rail cars, and airplanes. Logistics clusters have the physical assets and depth of experienced operator-instructors to train the next generation of these equipment operators. The port of Singapore Authority’s PSA Institute provides a wide range of vocational and professional training to logistics equipment operators. At any given time, the PSA Institute has some 11,000 students taking a wide range of courses on equipment operations, pilotage, port management, safety, and logistics. Since its founding in the 1970s, the institute has trained some 400,000 employees.13 The PSA Institute uses a mentor system in which experienced operators sit with trainees to provide hands-on instruction, feedback, and monitoring of the novice operators.

In addition, Singapore built a SGD12 million (~$9.5 million) Integrated Simulation Centre (ISC) in 2002.14 The ISC includes multiple simulators that are shared by the PSA Institute and Singapore Polytechnic. The crown jewel of the facility is a full mission ship-handling simulator that includes a 360-degree virtual view from the bridge of any of several types of large ships. Other simulators cover tugboat pilotage, engine room operations, crisis management, vessel traffic management, and electronic chart displays.15

Although the PSA Institute was set up by the port of Singapore Authority to serve the needs of the port, it also serves the entire country of Singapore, including the logistics, warehousing, transportation, and construction industries.16 Moreover, trainees from fifty-five countries have come to Singapore for education. The PSA Institute has conducted customized training programs for ports in places such as Indonesia, Sri Lanka, and the Republic of China. For example, when Vietnam created its first deep-sea container terminal in 2009, it sent seventy staff members to Singapore for training to learn port operations and how to handle Vietnam’s brand new large Post-Panamax cranes.17

In a similar fashion, the Dutch “Scheepvaart en Transport College” (STC) in Rotterdam offers basic professional certification in port operations such as basic stevedoring, radio operations, crane operations, container handling, forklift operations, bulldozer driving, tank storage, cargo surveying, tanker jetty operations, and hazardous material handling. In addition, it offers an array of shipping management and safety courses. STC is a public-private partnership with the Dutch Maritime Cluster (which is an industry association) supervising the quality of training.18

Conveyance Repair

Logistics clusters and transportation hubs create a nexus of conveyances and a natural location for conveyance maintenance and repair. But this requires sufficient specialized labor, especially for procedurally exacting and regulated mechanical tasks such as aircraft repair and maintenance. The growth of a cluster can create shortages of mechanics and motivate an expansion of education in the area. For example, when I visited AllianceTexas in July 2010, Russell Laughlin, senior vice president at Hillwood Properties mentioned that the North Texas region around the Alliance cluster has a shortage of 500 aviation mechanics. This has motivated Tarrant County College to buy thirty acres in the Alliance logistics park and expand its aviation-related training programs.

Training for Value-Added Services

Chapter 5 described how companies go beyond just storage and shipping of products to perform value-added services such as kitting, product repair, and packaging in logistics clusters. For the reasons described in that chapter, companies prefer to locate their time-sensitive warranty repair operations in logistics hub locations. Dense and frequent transportation options mean better service for the customer, but repairing or manipulating a product to add value requires more technical skills, such as those of electronic technicians. Value-added services also require highly specific knowledge of particular products and ongoing training to match constant new product introductions.

Some of the value-added services that UPS Supply Chain Solutions offers in its Louisville campus include test, repair, and refurbishment services to a range of electronics companies. Customers include makers of cell phones, laptops, and printers. UPS personnel test, troubleshoot, and repair the product as needed. But this implies that UPS SCS, like other hub-based repair operations, needs large numbers of trained technicians. For example, UPS’s repair operations for Toshiba require a workforce of some 120 technicians. At UPS, this training takes two forms.

First, UPS provides education for general electronics-technician skills. When UPS faced technician shortages, the company partnered with Ivy Tech Community College to provide a training program for assistant electronics technicians. The program enabled warehouse workers to upgrade skills from plain logistics to entry-level assistant technician. These assistants could handle some of the more routine tasks (e.g., recharging devices and simple diagnostics) while the full-fledged technicians worked on more demanding, higher-skill tasks (e.g., disassembly and repair). The short program didn’t earn a degree but it did give students a taste for the program and encouraged them to get the full two-year associate’s degree.

Second, UPS also provides training for specific value-added activities (e.g., repair) on specific products. New employees get a four-to-six week training program that slowly introduces certain processes to them. Existing employees also receive ongoing product-related training. Each time Toshiba introduces a new laptop, UPS and Toshiba must train UPS technicians on the specific troubleshooting diagnostics and repair procedures of the new model.

Get’ Em While They’re Young

Other clusters have programs that target younger populations even beyond the outreach effort of AllianceTexas. Memphis has the highest percentage of warehouse and transportation workers among the top 100 US cities.19 For that reason, workforce development is one of the top four priorities of the Regional Logistics Council of the Greater Memphis Regional Chamber of Commerce.20 Financial support from the Department of Labor and the National Science Foundation is helping establish a high school curriculum for logistics, a certificate for logistics, and an associate’s degree at a local community college. Dexter Muller, senior vice president at the Memphis Chamber of Commerce, explained, “What we’re trying to do is to get the kids coming out of high school doing dual enrollment and actually taking some of these logistics classes when they’re juniors and seniors. And then when they get out, in less than a year they could have a certificate in logistics. If they want to go another year, they’ll have an associate’s degree. If they want to go on, all of those courses transfer into a bachelor’s degree.” Furthermore, Dexter added that “most of the companies will reimburse their tuition when they get their associate’s degree.”

Local non-profit organizations in Memphis help with youth training in logistics, too. The Boys and Girls Club of Greater Memphis—which provides after-school programs for kids aged eight to eighteen—crafted a logistics vocational program at its Technical Training Center. “We want the kids that grow up in this community to have the skills to go out and make a decent living,” said Joe Sing, executive director of the center.21 The logistics course covers the basic skills of supply chain management, receiving procedures, safety procedures, and certification-related hands-on training on using forklifts and power jacks. “What this does is provide the kids an opportunity to have a real heads up [on the logistics field],” says Richard Goughnour, instructor in the logistics program.22 “What I try to do is to steer them into an entry-level position that they can be successful in,” Goughnour added. “We want to build life skills that apply not only to logistics, but also to what it’s like in the real world.”23

Cluster Support

Touring the port of LA, any visitor can see the wide scope of logistics-related education. Not far from the port’s main building and sitting next to its main channel is the Maritime Law Enforcement Training Center (MLETC). Along with international trade comes the specter of international crime such as smuggling, piracy, human trafficking, and terrorism. “To keep the port of Los Angeles safe, we must invest in our personnel and provide them with the latest training tactics and procedures to be on alert for any signs of potential terrorism,” said Los Angeles mayor Villaraigosa.24 Thus, the port of Los Angeles, in partnership with the state of California Emergency Management Agency and the US Department of Homeland Security, created the MLETC and developed a Maritime Training Program specifically designed for state and local law enforcement personnel.25

The size of the cluster and concomitant numbers of maritime-knowledgeable law enforcement officers makes LA among the best locations in the United States for such a center. The center’s instructors come from members of the Los Angeles Port Police, the Los Angeles County Sheriff’s Office, the Long Beach Police Department, and the United States Coast Guard.26 At MLETC, law enforcement professionals learn about topics ranging from boat handling to boarding procedures, water survival, navigation, rescues and counter-terrorism. A state of California port security grant paid for the multimillion-dollar facility and student tuitions cover the operating costs. The MLETC not only trains LA and California law enforcement officers, but it is also open to full-time officers and military personnel from around the United States and even abroad.

Professional Education

Although logistics may seem like a blue-collar activity of moving boxes and driving trucks, it encompasses significantly more. White-collar positions provide almost 25 percent of logistics jobs: office and administrative support (including stock clerks, dispatchers, and customer service representative, as well as office clerks) represent 17 percent of the workforce; first-line supervisors cover 3.4 percent; and positions in management, business, and finance are 4 percent of all jobs in the industry.27 With rising global trade and competitive demands for efficiency come rising demand for professionals, managers, and executives with knowledge of supply chain management including advanced management and control processes for warehousing, transportation, procurement, distribution, supplier management, information technology, and a host of related disciplines.

College Degrees

“To support Singapore’s growth as an international maritime center, a steady stream of high-quality maritime-ready graduates is required,” said Maritime and Port Authority chief executive Brigadier General Tay Lim Heng.28 To help increase the supply of graduates, Singapore established an SGD80 million Maritime Cluster Fund in 200229 and extended it in 2007 with another SGD80 million injection. The government applied the majority of the funds to creating new college education programs in Singapore and to sending Singaporean students to local and international programs.

The Singaporean government helped establish nine tertiary (college-level) programs in areas such as maritime business studies, maritime law, and economics, as well as naval architecture and offshore and marine engineering. This effort includes a deep partnership between the Maritime and Port Authority (MPA) and the National University of Singapore (NUS). “The partnership between MPA and NUS in developing the new programs is a step towards building that pool of graduates and also reflects our shared commitment to developing the right skills for the maritime industry,” added Tay Lim Heng.30 Other Singaporean educational institutes that conduct related courses and executive programs in Singapore include the Singapore Maritime Academy, PSA Institute, the local polytechnics (Nanyang Polytechnic, Temasek Polytechnic, and Singapore Polytechnic) and academic institutions, namely the National University of Singapore, Nanyang Technological University, and Singapore Management University. “Boosting the pipeline of maritime-ready graduates from our universities and polytechnics is a major part of our strategy,” said Singapore’s transport minister Raymond Lim.31

The Maritime Cluster Fund also supports a wide range of course fee subsidies and scholarships. These can defray the costs of seminars and courses as well as local and overseas post-graduate studies. As of early 2008, some 750 companies had used the Maritime Cluster Fund to send over 2,000 employees to a wide variety of maritime education and training programs.32 Because the government wants to support local industry, “MPA is therefore continuously engaging employers in the maritime industry, so as to develop training programs, courses and scholarships that meet the industry’s needs for seafarers, shore-based personnel and maritime engineers,” said minister of state for finance and transport Lim Hwee Hua.33

Other clusters show a similar pattern of local universities supplying logistics-related graduates for the logistics cluster. The University of Memphis Fogelman College of Business and Economics offers a degree in logistics and supply chain management. The university works with local businesses to customize courses and programs to business needs. Hillwood and the companies in AllianceTexas interact with and support several of the institutions offering logistics education in the area. These include Texas Christian University, which offers an undergraduate major in supply and value chain management,34and the University of North Texas, which provides a bachelor of science degree in logistics. Beyond Alliance, however, the Dallas/Ft. Worth Metroplex area is one of the largest logistics clusters in the United States. Thus, in addition to TCU and UNT, local universities with significant logistics and supply chain educational programs include the Dallas County Community College District, Tarrant County College District, Texas A&M University-Commerce, the University of Texas at Arlington, and the University of Texas at Dallas.

Specialized Degrees

As logistics clusters grow in size, they grow in sophistication, requiring professionals with more specialized degrees. For example, Singapore used some of the money from its ongoing Maritime Cluster Fund to create a Postgraduate Maritime Law Program at the National University of Singapore (NUS). This includes new degree programs such as a master’s in Maritime Law (LL.M) and a graduate diploma in maritime law and arbitration. “Shipping and transport-related subjects have always been important offerings at our law school, with its diverse slate of subjects and courses,” said Alan Tan, vice-dean and director of graduate programs at the NUS Faculty of Law.35

Universities in other clusters have similar specialized degree programs. For example, Erasmus University Rotterdam offers a master of science in maritime economics and logistics,36 a master in economics and business specializing in urban, port, and transport economics,37 as well as an LL.M. in business, corporate, and maritime law.38 In response to the needs of AllianceTexas as well as other logistics parks and activities around the Dallas-Ft. Worth area, the University of North Texas (near Alliance) created a new four-year degree program, the bachelor of science in aviation logistics.39 A logistics cluster’s demand for graduates in a specific topic motivates cluster-affiliated institutions to create new degree programs in that specialization.

Singapore’s effort in maritime law education also illustrates how logistics clusters give rise to ancillary clusters of economic (and educational) activity. “Our commitment is to work with Maritime and Port Authority (MPA) and other agencies, as well as shipping companies and law firms specializing in shipping law, to be the foremost maritime law training centre in the Asian region,” said Prof Tan of NUS. The MPA believes the new degrees will “further push forth Singapore’s aspiration to be the region’s legal services hub and complement the suite of undergraduate maritime law modules at the NUS Law Faculty.”40 As pointed out in chapter 5 and further described on p. 254 in chapter 9, logistics clusters often spawn other industry clusters, creating the need for other types of educational offerings.

Post-Graduate Education

Designing, managing, and constantly renewing logistics and supply chain systems requires a great deal of sophistication and analytic knowledge. Logistics systems analysis makes heavy use of mathematics—especially operations research methods—to optimize the movement of goods, assets, and people under constraints of costs, time, capacity, and uncertainty. Although a worker using muscles can move a box, it takes intellectual muscle to know which thousands of boxes to put in which hundreds of trucks to move at each point so that thousands of store shelves will always have just the right amount of product. Tasks such as designing a network of distribution centers, planning conveyance movement patterns, and optimizing inventories in the face of an uncertain future require significant technical sophistication. Consequently, logistics-intensive companies need managers and engineers with university and postgraduate education. For example, UPS employs 4,700 engineers to design and optimize its operations as well as 4,342 information technology specialists. Every year, UPS spends over $1 billion on information and communications technology, which is almost twice its yearly outlay for vehicles (package cars, trailers, and tractors), raising the question of whether it is a transportation and logistics company or a technology company.

In response, universities offer master’s and PhD programs that focus on logistics, supply chain management, and shipping-related disciplines. For example, the University of Southern California (in Los Angeles) offers a master of digital supply chain management program that includes a wide range of analytics-focused courses such as statistics, operations management, enterprise information systems, time series analysis, inventory systems, network flows, and project management.41 In port city clusters like Rotterdam and Singapore, some universities offer even more specialized logistics master’s degrees that focus on maritime issues, such as Nanyang Technological University’s master of science program in maritime studies offered in conjunction with the Norwegian School of Management.42

Research and Education

For the most part, vocational and professional education programs are knowledge dissemination processes seeking to teach large numbers of students the accumulated knowledge of the logistics profession. Yet this raises the question of where logistics knowledge is created. To this end, leading academic institutions go beyond knowledge dissemination to the creation of new knowledge.

Master’s degree programs—such as the MIT-Zaragoza master of engineering in logistics and supply chain management (ZLOG) Program,43 the Netherlands Maritime University-Rotterdam’s master shipping and transport program,44 and the University of North Texas’s MBA program in logistics and supply chain management45—share a common structure. They all combine a series of lecture-based classes with some kind of culminating research project or internship. Many of these thesis projects or internships arise from the companies in the cluster with which the university program is associated. Students apply their newly acquired analytical tools to create new knowledge while performing research for the cluster’s companies. Thus, the program becomes a knowledge-creating resource to the cluster as it trains the next generation of cluster professionals.

PhD programs and university research go a step further, explicitly seeking to expand the warehouse of human knowledge about logistics. Doctoral candidates in logistics embark on a three-to-five year research effort to create new scientific or engineering knowledge about supply chains and logistics. For example, in 2011, on-going PhD projects at the Center for Maritime Economics and Logistics at Erasmus University Rotterdam included: the role of logistics costs in international trade, the economics of specialized bulk shipping markets, ship finance techniques, maritime logistics, and competition-and-cooperation in liners and terminals.46 This doctoral research often includes data collection, mathematical modeling, software development, and simulated or real-world testing of hypotheses with the cooperation of companies in the cluster.

Cluster companies often help logistics doctoral research by providing operational statistics, survey data, and case studies as well as sometimes acting as guinea pigs for students’ experiments. Forty-eight prominent logistic organizations cooperate with Erasmus University Rotterdam, including Maersk, APM Terminals, APL, port of Rotterdam, ECT (Europe Container Terminals), and BIMCO (an international shipping association).47 The relationship between these logistics cluster companies and the logistics cluster universities creates a feedback loop of new logistics-related knowledge that is directly relevant to the cluster’s logistics companies. In addition to doctoral student research, the faculty, postdoctoral researchers, and staff of logistics cluster universities also perform research, sometimes as part of government or company-sponsored projects.

The Zaragoza Logistics Center (ZLC), located in the midst of the PLAZA Logistics Park, offers various graduate degrees, including a PhD in logistics and supply chain management. Since the summer of 2008, it has offered a PhD Summer Academy, inviting leading logistics scholars and PhD candidates from around the world for a six-week intensive program covering advanced topics in supply chain management. Topics covered in 2011 included: contracts and negotiations; design of service operations; healthcare operations management; inventory management; environmental concerns; and queuing theory.48 In 2011, some of the ZLC PhD students’ research interests included: green logistics; behavioral operations; closed loop supply chains; supply chain coordination; humanitarian logistics; supply chain strategy; inventory and warehousing management; finance and logistics; collaborative strategies; econometric analysis of healthcare operations; and reverse logistics.

The Nature of Academia in Logistics Clusters

In knowledge-intensive clusters, academic research strongly supports the local activities. The strength of computer science at Stanford and Berkeley, and biotechnology and engineering at MIT and Harvard, mean that companies located in Silicon Valley and Bio-Cambridge have access to state-of-the-art research and have a steady supply of highly educated employees, while faculty and students have access to cutting-edge real-world problems using the latest data. Such symbiotic relationships between university and industry are not limited to the information technology or biotechnology clusters; they also feed logistics clusters. The role of academic research in logistic clusters follows a somewhat similar pattern to those found in knowledge-intensive clusters such as Silicon Valley and Bio-Cambridge, with one possible difference: what came first. Whereas with traditional high-tech knowledge-intensive clusters, strong academic institutions played a founding role in sowing the seeds of the nascent technology industry, many logistics clusters began with industrial developments that then motivated the creation of specialized academic resources.

In many logistics clusters, the academic institutions supported the further development of the cluster, after the initial rise of the core of the industry. The reason may be due to the commodity-like nature of basic logistics operations. In the early phase of a cluster’s development, the cluster’s first entrants use industry-standard conveyances, equipment, and processes. Only when the cluster reaches scale does it become more differentiated and look for new growth through knowledge-intensive research and innovation. At this stage, the recognition of the role of knowledge creation drives the development of post-graduate programs and the development of avenues for research funding. Such “demand pull” is not unique to logistics clusters. For example, as described in chapter 2, California university programs on viticulture and enology followed the development of the Sonoma Valley wine-making cluster, rather than preceding it.

The distinction is important in the economic development process because it means that national and local government should not start with building educational institutions. Instead, the right location, physical infrastructure, regulatory framework, and tax regime create the main early building blocks of logistics clusters. The supply of labor, supported by general and vocational education, is the next priority, while creating postgraduate logistics institutions is important after the cluster is operational.

Infrastructure for Education

Many logistics clusters have educational institutions created specifically to meet the needs and schedules of logistics operations, including deep integration of education with cluster operations. Coordinating the timing of educational programs with companies’ operations can benefit both functions: companies gain higher-skilled workers (and managers), and educational institutions gain greater student populations as well as benefactors in the community. In addition, some of the leading logistics clusters have invested in specialized university facilities to support their logistics mission, upgrading their capabilities through partnerships with international centers of excellence.

College + Job = Education + Retention

When UPS was planning a massive expansion of Worldport, its Louisville hub, in 1997, it knew it would need several thousand part-time workers willing to work the night-shift sortation. The challenge was to find enough part-time night-owls. “Business, education and government must work together as equal partners to find solutions to our workforce development challenges and we must do it now!” said Dave Adkisson, president and CEO of Kentucky Chamber of Commerce.49

The state of Kentucky, UPS, and three local colleges found a solution: offer a free college education as a benefit to part-time night-shift workers. The partnership created Metropolitan College, housed in a 14,000-square foot classroom complex inside the UPS Worldport. Students work part-time at UPS and get paid standard wages and benefits. They can also go to school at Metropolitan College classrooms right at Worldport or take classes at the participating local colleges, getting reimbursements for tuition and a stipend for textbooks as long as they pass their classes.

UPS also created a school-to-work program for Louisville-area high school students. These younger students work a part-time day-sort afternoon shift at UPS, take college courses through Metropolitan College at UPS, and gain valuable educational and work experience. After they graduate high school, many of these students go on to work the UPS night shift and attend Metropolitan College.50

The results benefit all parties. The state of Kentucky got thousands of new jobs and thousands of new college graduates. Students got a free education and work experience. UPS solved its workforce supply issues. What was once an 80 to 90 percent employee turnover rate for UPS in some areas is now an 80 to 90 percent retention rate.51 Moreover, UPS gets to cherry-pick the students—offering full-time post-graduation jobs to the best students/workers. This strategy fits well with UPS’s start-at-the-bottom and promote-from-within human resources strategy, described on p. 242 in chapter 9.

Embedded Education and Research

Whereas many educational institutions in logistics clusters focus on vocational and lower-level professional education, the Zaragoza Logistics Center in PLAZA targets more advanced postgraduate education degrees and academic research. The ZLC offers international master’s and PhD degrees as well as master de logística (MdL), a degree in Spanish aimed at upgrading capabilities of the local workforce. More than 80 percent of MdL students at the ZLC come from Aragón and more that 85 percent of MdL alumni work in Aragón companies.

As with Metro College and UPS, the ZLC sits inside the logistics park campus, which makes the institution convenient for park members. The proximity also brings an opportunity for creating new cutting-edge logistics knowledge. Master’s and PhD students can do research projects tied to the park’s 160+ companies. In essence, the companies of PLAZA are a living laboratory for ZLC’s students and researchers. Engaging these advanced students in projects both expands the student’s knowledge of logistics and helps the companies solve tough problems, innovate, and become more competitive.

ZLC’s research creates new logistics knowledge for use within (and outside) the park. That’s one reason the Spanish Ministry of Education and Science designated ZLC as an official Knowledge Transfer Office (KTO). This KTO creates “the link between the ZLC and the community in terms of the exchange of knowledge, know-how, skills and expertise, for both commercial and non-commercial applications.”52 The Spanish government also designated the ZLC as the headquarters and leader of Spain’s network of technology science stakeholders in the field of integrated logistics, called the National Integrated Logistics Competence Center (CNC-LOGISTICA).53

ZLC’s structure and background reflect the global nature of logistics and logistics knowledge. ZLC is a partnership between Zaragoza University, the MIT Center for Transportation and Logistics, PLAZA, and the government of Aragón. Javier Velasco, the former government official who helped create and run PLAZA, declared, “If we want to be players in this industry, it is only natural that we want to also be in a privileged position in logistics research. So we created the Zaragoza Logistics Center, and we did it in collaboration with the Massachusetts Institute of Technology, an institution of proven quality… our goal was that anybody who wants to be a first class logistician will have to study in Zaragoza.”54

The ZLC-MIT partnership is not unique. The success of PLAZA and ZLC spurred MIT’s Center for Transportation and Logistics to create two other similar partnerships in Malaysia and Colombia as part of its global Supply Chain and Logistics Excellence (SCALE) Network.55 Other logistics clusters and academic institutions have partnerships, too. For example, the government of Singapore funded the Logistics Institute Asia-Pacific, a partnership between Georgia Tech’s Supply Chain and Logistics Institute and the National University of Singapore,56 as well as the MIT-Singapore transportation initiative, which is part of the Singapore-MIT Alliance for Research and Technology (SMART). Other foreign universities with logistics-focused Singapore programs include the France-based École Supérieure des Sciences Économiques et Commerciales and a partnership between the India-based School of Business Logistics in Chennai and the Singapore Institute of Purchasing and Material Management.

Recruiting Nexus: Alliance Opportunity Center

Other initiatives go beyond education to provide workforce recruitment and job access functions. Alliance Opportunity Center in Texas merges education, job placement, and recruitment. The Opportunity Center, established in 1998, is a nonprofit collaboration of five local organizations, including Hillwood, developer of Alliance Logistics Park; Tarrant County College; Fort Worth Chamber of Commerce; Tarrant County Workforce Solutions, and Texas Workforce Commission.57

In addition to offering various educational opportunities, Alliance Opportunity Center created a nexus to serve employers, workers, and the community in centralized job-matching functions. Job seekers can find openings at all of the employers at Alliance by applying at the Alliance Opportunity Center rather than applying for each specific job at each specific potential employer. The center tests and prescreens the applicants and stores their application profiles in a massive database, available to potential employers. In total, 125,000 applicants have gone to the Alliance Opportunity Center, creating a central repository of available labor—a warehouse for human resources.

The service is especially useful for new members of AllianceTexas or tenants going through large expansions calling for large numbers of new employees. For example, an incoming company might say, “we need 500 employees and here are our requirements. We need ten managers, twenty fork-lift operators.” As Russell Laughlin recounted to me, “that company can come in one day and go through pre-screen, identify qualified candidates, interview, hire, and they’re done.”

Knowledge Creation Nexus: Dinalog

In 2010, the Dutch Government created the Dutch Institute for Advanced Logistics (Dinalog) with a mission to coordinate the Dutch Research and Development Program for Logistics and Supply Chain Management. Dinalog is envisioned as the (physical and virtual) place where the private sector will cooperate with universities on tackling logistics challenges and developing technology and processes to enhance the country’s efficiency (see p. 160 in chapter 6 for Dinalog’s expected contributions to information technology for logistics). Dinalog is an explicit fusion of private, public, and academic sector activities under the auspices of a de novo institution. Its three-person supervisory board has one representative each from government, academia, and private enterprise. As of the beginning of 2011, Dinalog had ten partner knowledge institutes and 100 partner companies.

Dinalog addresses crucial education-related issues on several fronts. First, Dinalog supports workforce development under its “Human Capital” initiatives. These efforts include events such as a breakfast lecture series, multiday master classes for supply chain professionals,58 and a planned winter school for PhD students in logistics modeled after the ZLC’s summer PhD Academy.59 During Dinalog’s first year, 5,000 visitors attended various Dinalog-supported events.60

Second, Dinalog directly supports knowledge dissemination to the nation’s small and medium enterprises with a €4 million multifaceted effort. Dinalog is creating six regional Knowledge Distribution Centers (KDCs) with representatives from partners, education institutes, line organizations, and development corporations.61 “The knowledge that we develop together at Dinalog and the knowledge present in the Dutch knowledge infrastructure has to be used as widely as possible within the industry, so that companies can renew their business,” explained Wim Bens, managing director of Dinalog.62

Third, the bulk of Dinalog’s budget supports academic and applied research at Dutch universities. “Dinalog is the initiator of large applied research projects in which knowledge from universities and universities of applied science are used to realize practical innovations with Dutch industry,” said Professor Henk Zijm, scientific director of Dinalog.63 By mid-2011, Dinalog had started eight multiyear R&D projects to which it has committed €13 million. Dutch universities involved in the research include: Delft University of Technology, Eindhoven University of Technology, Erasmus University Rotterdam, Fontys University of Applied Science, University of Amsterdam, University of Tilburg, University of Twente, and VU University Amsterdam. An international scientific advisory committee, drawn from leading non-Dutch academic institutions, independently assesses Dinalog’s R&D projects for innovative strength and expected economic impact.

This research then feeds back into Dinalog’s education and knowledge dissemination activities. As Professor Zijm said, “If, under the coordination of these applied universities, we can feed those networks with the knowledge that is developed within Dinalog, businesses in all the regions in the Netherlands will eventually profit from it, and the knowledge can contribute to the education at the intermediate vocational level.”64

Last, Dinalog supports development of the country’s logistics education infrastructure. It goes further than the other cluster-related education institutions mentioned in this chapter because it seeks to systematically advance the nation’s education system as a whole. Dinalog supports these universities in curriculum development, marketing, and research. For example, it takes stock of all the courses available across the Netherlands to look for gaps in the nation’s logistics education system. Dinalog itself does not fill these gaps, but facilitates and finances the development and promotion of logistics courses. “Together with our partners, we finance and subsidize the development of programs in higher education,” Bens said.65

Dinalog is a cornerstone in the Dutch ambition to propel Holland, by 2020, to a leadership position in controlling the flows of goods throughout Europe.

Other Knowledge Dissemination Processes

Formal education and training programs aren’t the only processes for distributing knowledge in a cluster. Several phenomena that are more prevalent inside clusters than outside them help increase the flow of knowledge. As with other types of clusters, many of these phenomena arise from the movements and interactions of people who bring knowledge to the cluster or move knowledge around the cluster.

Tacit Knowledge Exchange

In addition to being a center for formal, explicit knowledge creation and dissemination, logistics clusters also foster the creation and flow of tacit logistics and supply chain management knowledge. As logistics systems and services become more intricate and global, much of the planning and operations knowledge becomes embedded in people and in their informal work routines rather than encoded in formal documents and specifications. That is, as complexity increases, more and more of the operational knowledge becomes tacit.

The exchange of implicit knowledge through chance meetings among employees of companies in the cluster, as well as visits to each other’s facilities, is one of the benefits of any industrial cluster mentioned by many economists. For example, Rodríguez-Posea and Crescenzi argue that “the process of knowledge accumulation gives rise to spillovers that could benefit a whole set of potential (intended or unintended) beneficiaries.”66

As part of the research for this book, I visited dozens of logistics facilities in clusters all over the world. When you tour places like ports, railroad yards, and warehouses, you cannot help seeing how the physical space is organized, where goods are stacked, where people are most busy, and how people spend their time. The ebb and flow of people, goods, and conveyances is on display everywhere. My casual observations and casual conversations at these locations always revealed a host of small innovations in each location, such as a clever way of staging shipments, a visual indicator to help coordinate packing, a physical layout that improved flow, an information technology application used in a different way, or a trick to reduce damage to pallets. Although almost anyone can see these innovations, only those people living and working in the cluster are likely to notice them and, more important, understand their significance.

In a logistics campus environment, job rotations, exposing workers to varied operations, are constant. When UPS SCS in Louisville gets a new customer, they don’t staff the new activity with inexperienced people. Instead, they carefully pick skilled, knowledgeable people from inside UPS without harming any of the existing functions or customers. By picking one person from one team, another from a different team, and so on, UPS can create an experienced new team and back-fill the minor vacancies in the existing teams. These lateral job rotations bring knowledge and experience together in new combinations, helping spread sound processes.

These job movements are easy to manage within the context of a campus like UPS’s Worldport because it has a sufficient number of large-scale operations; each large-scale operation can contribute one or a few experienced people without harming the existing operation while creating a large-enough core team for the new operation. Some of what UPS does within its campus, other logistics parks, such as AllianceTexas, foster within their borders, too, by providing information and contacts. And while logistics campuses and parks manage labor pools actively, the phenomenon takes place in other logistics clusters through chambers of commerce, staffing companies and local Internet sites dedicated to logistics labor requirements.67

Importing Foreign Skilled Labor

Countries can directly import knowledge and education by encouraging immigration of skilled workers and managers. Both Singapore and Panama encourage immigration by offering incentives for companies to locate regional or global headquarters in their countries. Panama uses personal income tax breaks to attract executive-level foreigners to work in Panama with the expectation that the incoming executives, managers, and companies will hire and train local workers. “They bring their employees for three years, train Panamanians, and then those Panamanians will grow into those jobs,” explained Henry Kardonski, managing director of Panama Pacifico, the developing logistics park situated on the site of the former Howard Air Force Base.

Singapore also directly supports immigration of workers with a more targeted approach that includes both skilled and unskilled labor. “Where local talent is difficult to find, the government policy on foreign manpower facilitates the sourcing of talent from overseas,” said Singapore’s transport minister Raymond Lim.68 Singapore’s foreign manpower regulations include both restrictions on foreign-to-local worker ratios and price mechanisms to permit, but regulate, the number of foreign workers in specific industries and skill levels.69

In addition to recruiting workers and managers, Singapore’s Maritime Cluster Fund includes SGD16 million to endow four visiting professors or distinguished visitor positions at local universities.70 These four positions are all related to ocean shipping. The visitors bring their knowledge and experience to Singapore and transfer that knowledge through undergraduate and postgraduate courses as well as seminars, specialist workshops and conferences for the maritime community in Singapore.71

Cosmopolitan Culture: Jet-Setters and Air-Freight

Along with the issue of human capital comes the issue of human cultures. The prevailing attitudes and behaviors of people in a location affect how they live and work. Companies, executives, and skilled workers can choose where they live, especially in the context of global logistics. Cultural issues influence those decisions and influence a location’s proclivities in participating in global trade and logistics.

Chapter 3 touched on the cosmopolitan cultures of places like Singapore and Rotterdam. Companies, traders, and workers from foreign lands flock to port cities to seek their fortunes and, in turn, these foreigners help make these cities into vibrant, cosmopolitan places. Kelvin Wong, logistics program director at the Singapore Economic Development Board, mused about the topic in his EDB office on the twenty-eighth floor of the Raffles City Tower. “Companies will need a good place in Asia to grow their business that is Asian-centric, and grow new businesses for Asia, and we believe that Singapore is the best place to do that. Because we have a very international population, we have a very international outlook.” Xenophobia isn’t compatible with global trade and logistics.

Few places can match the entrepreneurial spirit of logistics companies in Miami. The so-called capital of Latin America attracts a constant flow of immigrants who come to the United States to build a new life. Those immigrants have connections to their homelands, which they can use to start coordinating logistics activities as brokers, forwarders, customs brokers, and other trade facilitators (see the discussion of new business creation on pp. 245–252 in chapter 9).

A cluster location’s culture ranks high in the site selection decisions of global companies. Angélica Bertoli, legal director of Panama Pacifico, relayed to me the story of her negotiations with Procter & Gamble: “I sat with P&G when they were trying to establish themselves in Panama-Pacifico, and they said the number one reason is, of course, the tax breaks but the number two reason is the social aspect. Panama is very cosmopolitan. You have immigrants here from all over the world. Nobody feels like a foreigner. This was more of a social thing.” If the executives of a company are going to establish operations in a foreign logistics cluster, those executives will want to feel comfortable visiting or relocating to that cluster. “Their expats wanted to come to Panama to live. And that was very important,” Bertoli added.

Collaboration and Trust

Yet there’s more to the culture of logistics clusters than just interesting restaurants and a babble of foreign tongues on the sidewalks. Lean and efficient supply chains require collaboration of buyers, sellers, carriers, warehouse operators, and a host of ancillary service providers that broker and support logistics flows. Collaboration requires trust between logistics partners—knowing that each partner will handle its part of the process of storing and moving the goods, the information, and the cash. “Because of our reliability, because of our trust, because of our connectivity, because of our capabilities, we believe that we have actually attracted the many sophisticated global distribution centers and global supply chain projects that you have seen in ALPS [Air Logistics Park Singapore], and people like Dell having global decision makers here,” said EDB’s Wong.

AnnaLee Saxenian, author of Regional Advantage: Culture and Competition in Silicon Valley and Route 128,72 credits free knowledge exchange among potential competitors as one reason for the ascendancy of the upstart Silicon Valley high-tech cluster over the more established high-tech cluster of Route 128 in Massachusetts. Logistics has an analog of this cultural combination of collaborating and competing because logistics is a service; logistics workers know that the goods need to get to the customer on time and on budget. If that means facilitating a smooth hand-off with a competing carrier, then they’ll do it because the customer comes first, naturally (see also the discussion on cooperative behavior on p. 117 in chapter 4). Otherwise, everybody loses.

Workshops as Knowledge Distributors

Many clusters use education and knowledge-transfer activities like workshops, seminars, and conferences to inform potential trading partners and boost trade volume through the cluster. For example, the port of Los Angeles created free workshops called Trade Connect to help small and medium-sized enterprises in the LA area to export goods. Each half-day workshop provides information on the financial, marketing, documentation, and logistical issues that will help these businesses export more, and export more successfully. The workshops include experts from places such as the port of Los Angeles, Los Angeles World Airports, US Department of Commerce, US Small Business Administration Export Assistance, LA Customs Brokers and Freight Forwarders Association, and the Center for International Trade Development.73

With the success of the workshops, the port expanded Trade Connect efforts along three dimensions. First, it expanded the program to cosponsor more targeted conferences and seminars on doing business in particular regional markets such as India, China, Japan, and Korea. Second, it held more focused workshops for particular industries, such as providing a program to members of the California Fashion Association aimed at promoting exports of fashion, apparel and accessories. Finally, it took the workshops to the US Midwest. Trade Connect is part of the National Export Initiative, which is a federal government program to boost the US economy by increasing US exports and improving the balance of trade. As one port official put it, “We are tired of exporting air.”

From Education to Impact

Education underpins many of the beneficial economic impacts of logistics clusters discussed in the next chapter. Education creates a growing workforce with rising skills that leads to higher wages in the region. Professional and graduate degree programs lift some cluster workers into the upper echelons of white-collar employment. Educational institutions produce a growing educated workforce that provides one more incentive for companies to relocate to a cluster. Knowledge creation in cluster-affiliated universities and think tanks also helps spur the development of new companies that create innovative services.


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