The Quantum Leaps in Logistics History
Author: Matthias Gaul
The Cinese Wall or the Pyramids of Gizeh were systematically organized masterpieces. These origins of logistics go back more than a thousand years to the past. Since then, the industry has undergone one revolution after another.
Noodles in the supermarket, gas at the filling station, mail in the letterbox, just-in-sequence deliveries to the production line – the list of examples goes on indefinitely. A life without logistics would be simply inconceivable. It suffices to say that virtually everything is logistics. According to the study “Logistics Top 100” by the Fraunhofer Supply Chain Services (SCS) working group in Nuremberg, Germany, the industry’s 2016 turnover amounted to approximately 1.05 trillion euros in Europe alone. The global sales volume for the same year is estimated to have been between 6.5 and 7 trillion euros, according to Martin Schwemmer of Fraunhofer SCS. The industry is virtually unparalleled in the way it has undergone revolution after revolution, and that for millennia. And that is no exaggeration.
Indeed, innovation cycles are becoming ever shorter, as they are in other sectors. Yet they all have their roots in outstanding logistical feats related to landmark events of historic proportions. It isn’t hard to think of an example – just consider the construction of the Great Pyramids of Giza, the Great Wall of China, the campaigns of Julius Caesar and Napoleon, the invention of the steam engine, the beginning of industrial mass production, the rise of rail and automobiles, computer technology, the digital revolution and much more. Modern logisticians work tirelessly to optimize supply chain management processes, while Alexander the Great had already demonstrated in the fourth century BCE how the efficient planning of goods supplies and a constant supply of fit men for the military can be leveraged into a colossal empire.
Infrastructure developed over centuries
Nowadays, the preeminent mode of transport for international freight is by road. According to 2016 figures from the European Commission, the modal split of transport in the 28 EU member states was dominated by on-road transport. Indeed, 76.4 percent of deliveries were made using the road network, 17.4 percent by rail, and 6.2 percent by ship. This has remained more-or-less the status quo for years. The most recent World Transport Report, published by Prognos AG, projects that by 2040, road freight transport will make up 75 percent of the transport market in leading EU countries – such as France, Belgium, Poland and Sweden – while the figure will be 55 percent in the USA and almost 53 percent in China. This of course requires the infrastructure capable of supporting it. Again, this is an area in which our ancestors achieved incredible feats with rudimentary technologies. The Romans laid thousands of kilometers of roads and streets all the way across Europe, and also pioneered the construction of canals across the continent. Some of their constructions remain intrinsic parts of Europe’s maritime logistics infrastructure, even today.
Another structure of yesteryear is the old Silk Road, which stretches from China to the Mediterranean. This network of cara-van routes spanned over 6,400 kilometers, and supported lively trading dating back to the second century BCE. Should the proposed 900-billion-US-dollar megaproject “One Belt, One Road” go ahead and resurrect the Silk Road in all its colossal glory, the legendary connection will take a whole new dimension. The new Silk Road, which is scheduled for 2049, should involve more than 65 countries – by land contribute to the development of markets along the strategic trade route, and elevate the industrialization of many countries to a whole new level.
Digitization transforms logistics
Whether this will contribute to the achievement of similar milestones that industrialization enabled for Europe and the USA remains to be seen. Back at the end of the 18th century, it was the invention of the steam engine that provided a quantum leap for logistics. The development of rail transport and automotive manufacturing was a huge factor in the until the advent of the truck that large quantities of goods could be transported directly from manufacturer to end user. The quantity and flow of goods skyrock-eted in the years to follow. With his 1956 innovation – the 20-foot shipping container – US ship owner Malcom McLean became one of the founding fathers of globalization. Goods that had previously been shipped as individually packaged goods could now be efficiently transported in steel boxes measuring exactly 6.06 meters long by 2.44 meters wide and 2.59 meters high. Through this one innovation, the capacity of the logistics chain was able to expand dramatically, meaning that companies involved now had to seriously consider their material logistics and warehousing. Over its lifetime, the humble container has seen its own share of technological revolutions. Due to the high cost of shipping empty containers – estimated to a total of 25 billion euros every year – Dutch start-up Holland Container Innovations developed the collapsible container. The space-saver, when folded, is a mere quarter of the size of the regular container, taking up much less valuable room on the carrier – be that a truck, train or container ship. This allows higher numbers of empty containers to be carried, or more space to be taken up by actual freight.
When talking about quantum leaps in logistics, one would be remiss not to mention the IT revolution. Nowadays, digitization has infiltrated every area, and almost everything is connected with everything else – be that the vehicles involved, the machines or goods themselves. This transfer of data is an intrinsic part of Logistics 4.0. One future trend is already plainly obvious to Martin Schwemmer of the Fraunhofer Supply Chain Services working group: “Regarding logistics as a ‘gateway to the customer’, data in particular will become even more valuable as a key business success factor relative to the physical product and service itself.” There are two interpretations of this – shipping agents benefit from improved connectivity, communication and transparency for agile processes, while the industry itself is more-or-less forced to profit from the digital revolution. After all, it isn’t just the dispatchers that have lofty expectations of friction-free processes. Consumers do not want to lose the ready availability of goods that they have become accustomed.
Overview of the Leading Logistics Service Providers
According to the study ‘Top 100 of Logistics’ by the Fraunhofer Supply Chain Services working group, the European logistics industry generated 2016 revenues of approximately 1.05 trillion euros. Of this, the working group states that approximately 50 percent of all services were performed by logistics service providers – in other words outsourced by industrial and commercial businesses to freighters. The remaining 50 percent is accounted for by warehouse and works traffic of the loading industry. The 2016 global turnover of the logistics industry was estimated by the working group to be 6.5 to 7 trillion euros.
The Fraunhofer SCS divided logistics megatrends into two categories: externally and internally influenced. Falling in the first category are trends such as globalization, followed by demographic changes and the emergence of new lifestyles which are reflected in buying behavior and business relationships. An important trend in the second category is the technological revolution, the emergence of new logistics players and the increase in professionalization.