Transformational Logistics

The worst floods in Pakistan’s history have affected at least 14 million people. Some 1,500 people have been killed to date; 1.4 million acres of crop land has been flooded; 10,000 cows killed; roads and power supply networks have been shattered and, food will be needed for 1.8 million people for the next three months at least. There is a serious threat from water-born diseases and cholera in particular. Pakistan is facing weeks, months and years of need. Sadly, major disasters like this and others such as in Niger occur frequently in the developing world where vulnerability is high, resources are limited and, all too often build back does not mean build back better. In other words, infrastructure and buildings are re-built piecemeal, cheaply and, not always to a standard resilient enough to the next calamity.  To improve response to such disasters, Humanitarian agencies are developing tools to assess vulnerability and prepare regions at risk with the resources and know how to respond more effectively and efficiently to hurricanes, monsoons, droughts and volcanoes.

In Humanitarian Logistics terms each disaster has three core phases: preparation and readiness; response and, rehabilitation. Here, we look at how vulnerability is assessed and the impact this has on response. Then, we explore what happens after the weather or the rubble clears and, highlight the potential for Transformational Logistics to be a catalyst throughout the rehabilitation phase to deliver livelihoods, self-sufficiency and, sustainable growth.

(more…)

These past few days have seen the withdrawal of US combat battalions in Iraq ahead of schedule. This is hardly what President Bush meant when he proclaimed “Mission accomplished” from an aircraft carrier back in 2004 but, it draws a line under the so-called “Liberation” phase and moves Iraq to what has been called a “New Dawn”. Here, we explore Iraq’s historical roots; take a look at the logistics of withdrawal and assess the position for logistics going forward. All logistics flows (physical movement; information; cash and, labour) will play a key role in building a viable market economy and yet, we see a clear need to develop a fresh logistics perspective fit for this challenge across diverse regions; high tech and low tech sectors and, hybrid supply chains that make do with what is in place. This is Transformational Logistics territory and could be a useful learning curve for other developing economies and, those markets moving to the third phase of Humanitarian response – rehabilitation.

History tells us that Iraq was carved out of part of the Ottoman Empire as it fell apart after World War 1 (1914-18).  This was Mesopotamia, the land “between two rivers” (Tigris and Euphrates) which stretched back into antiquity and was, founded in 3500 BC, the cradle of civilisation. The Babylonians were the first to develop a system of economics and, made significant advances in maths. Based on the sexagesimal (base 60) numerical system it was the source of the 60 minute hour, 24 hour day and 360 degree circle. The sumarian calendar gave us our seven day week and these skills were of considerable use to the early map makers. Fast forward to World War 1 and, the Sykes Picot Agreement (1916) and a carve up of a defeated Ottoman Empire. Supported by Russia, France’s sphere of influence would be Syria and Lebanon and Great Britain’s Palestine and Iraq – which had Henry Cabot Lodge, a patrician senator from Massachusetts, thunder: “England is taking possession of the oil fields of the world”. Oil had been discovered in 1901 and, has played a major part in the Iraq story ever since.

Iraq is taken from the Arabic word for “venerable” and “well rooted” and yet, by the time the country was pulled together after the War it was far from being a settled and well rooted community. Seventy-five per cent of the population of Iraq was tribal, with no previous tradition of obedience to any single government. The geography was made up of the Kurds to the North who spoke an Indo European language and, an Arab grouping of Muslims split into a majority of Sunnis and a vociferous minority of Shiites. This was the assessment of the American Arabists of the day whatever the British, such as Gertrude Bell, said.* It was never going to be easy to consolidate Iraq and, fast forward to the most recent past and Iraq has been charged with conflict – a Report by a political think tank from Mumbai set the opportunity cost (1991 to 2010) for the wider Region at $12 trillion. Under Saddam, the war with Iran (1981-88) claimed 1.5 million lives at a cost of $100 billion. Then, after claims of slant drilling into Iraq by the Kuwaitis there was the First Gulf War to be followed by the shock and awe attack that toppled Saddam. The cost of all of this has been huge. For the US and Coalition the bill looks like being $1 trillion and, for Iraq itself GDP could have been 30 times present values. In other words, every Iraqi could have been earning $9,600 instead of $2,300 in 2010.

In one sense, Iraq was born of Logistics. The British sealed the Sykes Picot Agreement to ensure that they had control over strategic locations – Baghdad in the centre; Mosul to the North and, Basra on the coast to the south. The Germans started to build the iconic Berlin to Baghdad (and on to Basra)  railway line in 1903 –  it was completed in 1940. Both colonial powers were interested in two things – oil and, a route to India.

Now, let’s explore Logistics in Iraq today. First the logistics of withdrawal.

The US will be leaving a holding force of some 50,000 personnel to be part of the New Dawn phase of the Iraq project. Meanwhile, combat resources have been withdrawn. In personnel: 160,000 troops; 56,000 civilian contractors; 50,000 foreign workers. In materials: 618 helicopters; 1,900 tanks; 34,000 tons of ammunition; 43,000 vehicles; 100,000 pieces of rolling stock and 4 toxic waste sites. Then, there is the stock from the supermarket network that had served the US and Coalition community within Iraq. This included 2.7 million candy bars; 1.6 million cans of soda and 330,700 CDs and DVDs. As one US Army official put it: “this has been like picking up LA and moving it some place else.” And, they needed 240,000 truckloads; 120,000 containers; 8,000 convoys; 119 shiploads and 40 C-130 planes carrying 55 troops at a time; to do it. This does not come cheap. Every 747 cargo plane that left Iraq cost $1.3 million. This has happened quickly. The Vietnam withdrawal of 365,000 troops and all their baggage took place over a much longer period from 1969 to 73. And yet, for all the talk of withdrawal, no one can be under any illusion that success will be defined by what is left behind.  (more…)

Over the next few weeks, the Transformational Logistics Blog will be upgraded to incorporate a number of new features. We will be including a series of Interviews with players in the field and here, we start with an interview with Arseny Yershov – the Head of Marketing with National Customs Broker LLC, Russia, based in Moscow.

The opinions expressed are personal and are all part of a process of opening up the debate on logistics and supply chain thinking and practice relevant to emerging and developing markets. We thank Arseny for taking the time to talk through the Russian Logistics story.

Question 1. Rob Bell (RJB). Arseny, you work for a major player in the Logistics arena in Russia and have been reading the Transformational Logistics Blog for a while. Before I ask you about your own views on the Russian Logistics scene can you give us some idea of the area that you work in? (more…)

As indicated in the Post on the Logistics Performance Index (2010) on this T L Blog; between leading performers from the Developed world – such as Singapore and Germany – and, the poorest performers in Developing markets there is a significant middle ground. Best practice from conventional logistics tends to see supply chains as converging to a homogenous operational model and these markets are far from being such smooth operators. This is Transformational Logistics territory and the opportunity is to develop operating models that can cope with highly fragmented and far from homogenous markets featuring modern and traditional approaches across all sectors. These are the Emerging markets that are experiencing fast growth but have to deal with a number of significant challenges from governance to infrastructure, the lack of a professional logistics culture and, the absence of fully transparent supply chains across often highly contrasting geographies within their own borders.

Russia is a classic example of those high potential markets characterised – in logistics terms – by poor infrastructure and facilities; hybrid supply chains combining traditional and modern practice and, facing all manner of operational challenges, often opaque business practices and macro level economic volatility. Russia is one of the so called BRIC economies but has, in many analysts eyes, failed to match consistently the growth dynamics of the rest of this stellar group. Mind you, though Russia was hit hardest by the impact of the 2008-9 global depression – an oil price collapse from $140 to $45 per barrel when Russia needs c$75 for a balanced budget was a severe blow – it has returned to an estimated 7 per cent GDP growth in a dramatic turnaround. Here, we explore the logistics challenge for Russia and highlight how  T L could be a catalyst for a wide range of logistics and supply chain initiatives. Russia – unlike Africa and the need for simply modal solutions or, India and China with their huge domestic markets – has the potential to become the hub between Asia and Europe and this makes for a different set of challenges and priorities.

Eleven time zones is just the start ...

Back in 1915, the Tsars Army, as Norman Stone (1975) illustrates, were far better supplied than conventional wisdom would allow. Even Lincoln noted that Russia, in 1916, had grain to spare and the Germans were wary of the stockpiles of most miltary equipment. Yet, each bullet fired by a Russian soldier had to travel 4,000 kms from source to the front and, each artillery shell was transported 6,500 kms from manufacturer to the guns. It was more efficient to import these shells from Baltic sources than to move them from Krivoy Rog in the South of this huge country. Then, there was General Winter and rasputitsa (quagmire) to contend with for Russian and enemy troops alike. In Finnish, a similar word rospuutto means “roadlessness”. In the end, as the guns fell silent because the supply lines were gridlocked, the troops were reduced to fighting with bayonets and bare hands. Russia has always been a major logistics challenge from Peter the Great to Napoleon; World War 1 to the Revolution and Civil War; throughout the Soviet years and, into the open market era. (more…)

A summertime look at the global economic dashboard surveys the debris of GDP growth statistics from 2009 and looks forward to an uplift for this year. There are few surprises in these dismal figures – for the developed world. The USA registered -2.4% GDP “growth”; EU Zone, -4.1% and Japan, -5.2%. These figures contrast starkly with those of China, 8.7%; India, 6.6%; Brazil, o.2% and Russia bucking the developing trend with -7.9%. So, where are we now? Well, out of this debris has come the momentum that creates the G20 agenda and this is endorsed by the 2010 figures as follows. The USA 2010 GDP growth figure is looking like 3.2% and, the EU Zone, 1.2%. Meanwhile, over in the emerging markets stormy weather seems to be clearing much faster and growth is strong with Brazil, 6.5%; Russia, 5.5%; India, 6.6% and, China, 11.1%.

Trawl some more through the mass of global economic statistics and it is worth a glance at the world according to the Standard & Poor Index. S&P is one of three Internationally renowned agencies with a monopoly of the global Ratings Industry. The others are Fitch and Moodys. All three emerged in the 19th and early 20th century to become part of the global financial furniture – both Moodys and S&P have a 40 per cent market share of the ratings industry. In fact, Moody’s book on railway investments back in 1909 started using letter grades to assess their risk which remains in use today. For example, take a look at the S&P map of the world and you will note the AAA (top grade rating) features in North America, the European Zone and Australia. The main Gulf States merit a more subdued AA+ to AA-. Meanwhile – and take a glance back at the growth figures for the BRIC economies as you do so – Brazil, Russia, India and China come in at a rather subdued BBB+ to a BBB- rating. This follows 1. AAA (maximum security rating); 2. AA+ to AA- (top to good quality risk) and, 3. A+ to A- (medium quality risk). This fourth layer of risk is categorised as BBB+ to BBB- (middling to inferior rating) and is then followed by the purely speculative BB+ to BB-. Then, there are the African countries and the Stans of the former Soviet Bloc with no rating whatsoever. (more…)