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Logistics Clusters

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Logistics Clusters: Delivering Value and Driving Growth by Yossi Sheffi

Dr. Yossi Sheffi is a professor at the Massachusetts Institute of Technology, where he serves as Director of the MIT Center for Transportation and Logistics. He has worked with manufacturers and logistics companies around the world as being a successful entrepreneur.

Dr. Sheffi's latest book is entitled "Logistics Clusters", which may be a new term for some people, but it really is a geographical collection, or cluster, of logistics-intensive operations. There are many examples of clusters identified by Dr. Sheffi, but one that is easily recognizable is that of Silicon Valley. There are many reasons why Silicon Valley is this area of intense innovation which draws new firms to the area, such availability of funds from tech-savvy venture capitalists, an educated population due to the location of prestigious universities, and a culture that is ideal for the sharing of ideas, as well as healthy competition. Dr Sheffi identifies a number of clusters that have been created over the last five hundred years that have displayed the same attributes of today's Silicon Valley, but in many differing fields, such as art, finance, and entertainment.

Dr. Sheffi gives some interesting examples of the geography of clusters throughout history. It is very interesting to see how these clusters, in different periods of history, have similar traits with the presence of transportation links, whether it is the Panama Canal or FedEx's home city of Memphis, Tennessee.

The book explores some of the advantages that logistics clusters have which can help their development and the attraction for other business. The transportation aspect of clusters is an obvious advantage; a major transportation hub is of great importance to companies that depend on logistics and would gain from direct service to markets rather than being in a location with fewer routes. As much as transportation, clusters will benefit from the increased freight that the cluster generates. The larger the cluster the more freight will be moved in and out of the area, which in turn can lower prices and improve customer service, especially if competition for the logistics business increases.

The subtitle of the book is "Delivering Value and Driving Growth" and that is vital when we look at the role of government in logistics clusters. The benefits of a logistics cluster are that it offers economies of scale, greater value to the customer, better customer service, as well as promoting new businesses to move to the area around the cluster, which in turn generates jobs. Governments in any area of the world are very keen on creating jobs and the obvious benefits of logistics clusters can stimulate governments into targeting these areas for investment. Dr. Sheffi highlights the many ideal ways in which government should invest in logistics clusters. Some of these are not possible in cash-strapped western nations, but in developing countries such as China and India, the investment in resources, as well as the introduction of laws and regulations to assist industry and logistics companies will benefit the clusters.

In this book Dr. Sheffi has demonstrated that the logistics structure offers more than just an industrial center, as it benefits from the economies of transportation, that can give far more advantages to a region. This in turn can attract new companies, generate new jobs and further stimulate the area. Dr. Sheffi explains the theories behind the logistics cluster with a perfect mix of examples from around the world.

Logistics Clusters by Yossi Sheffi is published this month by the MIT Press and available from their MIT Press.

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