Supply Chain Frontiers issue #36.
Logistics parks have grown in number across the globe in recent years, with governments and real estate enterprises supporting the development of these facilities. Yet, there is no standard framework for logistics park design to guide the builders and managers of these facilities. Research into the attributes that are common to logistics parks across the globe carried out by Marcela Giraldo, a researcher at the LOGyCA-Center for Latin-American Logistics Innovation (LOGyCA-CLI), will help the industry to develop such a framework.
An important factor in the success of a globalization strategy is the efficiency of the supporting supply chains – and supply chain efficiency is influenced by the location of a company’s operations. Since logistics parks bring together the services needed to develop a well-run supply chain in selected locations, it follows that these facilities can play a vital role in enabling companies to capture the benefits of global growth. This is one of the main reasons why logistics parks have enjoyed dramatic growth worldwide.
In China, for example, more than 1,000 logistics parks have been built in the past decade. Such has been the success of the concept across the globe, that these facilities are being promoted as a key component of regional economic growth in both developed and developing countries.
However, the concept of logistics parks is not clearly defined across languages, countries, continents, and industry sectors. In Germany, for example, they are called “freight villages,” whereas the Japanese refer to them as “distribution parks,” and in other countries they are known variously as “logistics centers,” “logistics platforms,” and “Distriparks.”
When logistics parks first appeared their main function was to centralize company operations using shared warehousing and transportation infrastructures. Since then, the concept has evolved into a broader array of services, partly because it has attracted more government support and a wider range of logistics services providers. The global increase in logistics outsourcing business has also spurred the growth in logistics parks.
The LOGyCA-CLI research was completed at the Zaragoza Logistics Center, Zaragoza, Spain, in May 2009, for a Master of Engineering in Logistics and Supply Chain Management thesis titled, “Logistics Platforms.” The main objective was to identify the characteristics that are common to these facilities worldwide. The work focused on key features such as location, transportation modes, general services, and value-added services.
The location of logistics parks was found to be the most crucial factor in achieving competiveness. Location is influenced by the distance to the nearest city and principal modes of transportation. Logistics parks located near a main city should be a maximum travel distance of 30 kilometers and 30 minutes of travel time.
Facilities located near a secondary city – defined as a city with a population between 0.1% and 2% of the country’s population – should be a maximum travel distance from the city of 20 kilometers. There were similar findings related to travel distance and time to the nearest airport and seaport; these results did vary by continent, however.
In terms of proximity to modes of transportation, the research found that, at a minimum, logistics parks must offer easy access to highways in order to be competitive. Only 27% of the parks in the analysis offered four modes of transportation.
Value-added and general services were analyzed to determine which ones are the most common in logistics parks. Rotterdam Distriparks and Trade-Port Singapore offered the widest number of services in the group of facilities scrutinized.
Clearly, logistics parks must offer the optimum blend of services and amenities if they are to provide value for their customers. It is important that a diverse range of service providers are co-located in these complexes, such as third-party logistics services providers, manufacturers, and government agencies.
The degree to which facilities can deliver reduced costs and operational improvements also depends on the types of companies that they attract. Moreover, the nature of each company’s business and its strategic goals must complement the service profile of the logistics park.
When the right mix of services and customers is achieved, logistics parks can be extremely effective. For example, although there is no accurate information on their cost advantages, a number of European studies suggest that by using these facilities, companies can capture reductions of 7% to 12%.
The thesis highlighted a number of further research topics that LOGyCA-CLI could pursue – for example, measuring cost reductions along the supply chain and changes in operational KPIs (key performance indicators) for a specific company after it had located in a logistics park. A similar analysis could be carried out for third-party logistics services providers. Another possibility is to measure the economic impact of logistics parks in Latin America.
For more information on the thesis research, please contact Marcela Giraldo. She leads LOGyCA-CLI research projects such as Latin-American Logistics Maps and Logistics Benchmarking.