An estimated 4 billion people or, three quarters of the world’s population live in the informal market. They live in the favelhas of Brasil, the shanty towns of South Africa, slums like India’s Shadow City, Dharavi in Mumbai – places that lack basic amenities but can shock you with their innovative instincts. Let’s look at this another way. Four billion people represents …
… a significant opportunity for all types of products and, the demands on logistics expertise to serve the informal market and, its links to the formal market are growing. Aside of the market there is much more to learn – the informal market is a hotbed of innovation on products, process and even recycling. There is relevance beyond the developing economies. For example, there are those economies that have been through a period where, with the market fractured or in a state of flux, logistics has been the preside of the military and humaitarian agencies alone. In this case, there is real scope to use logistics techniques as part of the transformation of the economy from a state of survival to a consumer based member of the global marketplace.
And yet, there is no overarching framework for logistics in this informal / formal arena. This blog promotes the development of Transformational Logistics as an umbrella term or toolbox capable of raising Logistics debate, learning and practice both within the informal market and, in its relationship with the economy as a whole.
Transformational logistics works in two ways:
1. As an integrator of the formal and informal economies; promoting effective and efficient ways to deliver inclusive and sustainable growth.
Transformational Logistics is all about building the wide ranging connectivity (physical; cash and information flows) to support hybrid business models that recognise the mutually beneficial synergies between formal and informal markets.
2. As an enabler in the transition of an economy from a natural disaster, the devastation of warfare or a Soviet Style Centrally Planned Economy to a stable market economy capable of delivering sustainable and inclusive growth.
Transformational Logistics acts as the bridge between a state of military, humanitarian or centrally planned logistics to a stable market economy capable of delivering sustainable and inclusive growth.
Economic growth worldwide is unbalanced but this does not mean that it can’t be inclusive. As the World Development Report 2009 highlights, informal communities will not disappear. They will emerge and grow as the rising demand of workers and firms outsrips the capacity of governments to institute well functioning land markets and to invest in infrastructure and accomodation.As Professor Martin Christopher has made clear supply chains compete not just companies and, this perspective soon opens up questions about the relationship between formal and informal players in sourcing, supply and even demand. After all, the product you buy in a Fashion Store in, say, Hull may be a recognised brand but, the production process that sourced the material and made it is likely to be in a place far removed from the cool image you bought into. The supply chain that made this happen is more than likely to be a hybrid of formal and informal players working together in all sorts of improvised ways. Endless case studies on better, cheaper and faster ways of working between large Corporates like P&G and Walmart do not tell the full story of logistics in a globalised world.
Let’s start with the recognition of the formal and informal economies as part of the same marketplace.
Let’s look at Logistics in fast growing, emerging, transitional or even fractured economies. Here, Logistics is not like some well honed orchestra playing from sheet music that never changes. Logistics reality in these transitional markets resembles a jazz set where every player has to improvise to make their mark on the overall results.
There is no better illustration of the connectivity challenge facing emerging markets than the last mile to and from the port. Transformational Logistics extends Logistics vocabulary and practice into this asymetrical arena where conventional business practice literally runs out of road.
Another analogy would be an ant colony – that behaves with an intelligence no particular ant possesses and a city develops districts and neighbourhoods no planner could impose. Order (and synchronisation) arrives from the bottom up, not top down. This is the essence of the informal economy and, captures the image of the decentralised, diverse and adaptive thinking that we are trying to capture with the Transformational Logistics concept.
There are many anomolies – legal, labour relations, gender realities, productivity and now the environmental agenda. Professor Saskia Sassen with her book Global Cities opens this up with notions of the parallel geographies of urban glamour and slums. And yet, with the informal market offering huge commercial opportunities this can and should be a two way street. This need not be a clash of civilisations.
And then, there are those economies recovering from the ravages of natural disaster or warfare. So much needs to be done to move beyond survival whereby logistics has focussed food and medicines alone. These economies are working to move beyond this survival state and pull together the infrastructure and business environment that can deliver inclusive and sustainable growth.
Transformational Logistics seeks to pull together a number of techniques and blend them into a framework that can make a contribution to the Logistics agenda in the Informal economy and its relationships with partners from the so called Formal arena.