TRANSPORT

LOGISTICS

Past, Present

and Predictions

Issa Baluch

All maps and illustrations by Rizal Endiafe and Jay Rozel Endiafe. Maps are for informational purposes and are not intended to show authoritative boundaries, landforms, or infrastructure.

Photograph of the Great Wall of China, Gaallo Images. Photograph of Forbidden City dragon carving, courtesy of Paul Noll. Photographs of Berlin and Stalingrad Airlifts from the personal collection of Stalingrad historian Dr. Joel Hayward (http://www.joelhayward.org) and reproduced with his permission. Photograph of Hathor Temple at Abu Simbel, Rachel Kriss. Photograph of the Great Temple at Abu Simbel, Gaallo Images. Artist’s rendering of FastShip, courtesy of The Newenders Corp. Artist’s rendering of ADX Fast Containership, courtesy of BMT Nigel Gee and Associates Ltd. Illustration of freight pipeline by Rizal Endiafe. Artist’s rendering of Pelican ULTRA, courtesy of the Boeing Company.

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ISBN: 994803139-3

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To Shelley, Sarah, Adam, Arif, Zein, Iman, Vashti, Tirzah, and Aviya

My wife Shelley has been a great source of encouragement to me throughout my career, and I often wonder what I would have done without her. Over the past 10 years, as I thought about writing this book, she has done nothing but support me.

A doctor I recently met commented that once his last patient leaves his clinic at the end of the day he is basically free to go home. While that may be true for some professions, mine has required a great deal more of me due to the constant need to communicate with people in different time zones and the exigencies of the work itself. I find it a great privilege to dedicate this book to my family in gratitude for the support and commitment they have provided over the years.

ABOUT THE AUTHOR

Issa Baluch is credited with having pioneered the thriving sea-air combined transport freight business that operates in the United Arab Emirates. Baluch holds a Master’s degree in Business from the University of Hull (UK) and completed numerous aviation, transport, and freight forwarding programs. He started as tally clerk at Gulf Agency Company in Dubai in 1973, rising to the position of General Manager. Baluch helped to develop the freight arm of the group, until 1989, when he started his own organization, Swift Freight International. Today Swift is among the top freight logistics providers in the UAE, with a network of over 35 offices in 18 countries throughout Africa, the Middle East, and Asia. Aside from being Chairman and CEO of the Swift Group, Baluch served as President of FIATA (the International Federation of Freight Forwarders’ Associations) from 2003 to 2005. He is a member of the Board of Directors of The International Air Cargo Association (TIACA), the Advisory Board of Dubai Logistics City, and the Marketing Committee for the Dubai Flower and Perishables Centre.

Rachel Kriss assisted Issa Baluch in researching and writing Transport Logistics: Past, Present and Predictions. She earned a Bachelor’s degree in English writing and Spanish from Eastern University (US). Her writing has appeared in newspapers and magazines in the United States and Dubai.

FOREWORD

The world has witnessed Dubai’s groundbreaking achievements in logistics and multi-modal transport, and will continue to do so in the coming years. With its superb infrastructure, Dubai has become a major player in global trade, as well as the regional trade and transport gateway of choice. The Emirate’s reputation for excellence in transport logistics has been built over many years due to the contributions of individuals like Issa Baluch. As a local industry leader, he has pioneered new projects and brought a new level of professionalism and global consciousness to the freight forwarding industry. As President of FIATA, he has demonstrated effective leadership on an international level. And now, as an author, this industry veteran offers much-needed advice and inspiration to the global freight logistics industry.

This highly informative book sheds new light on a number of monumental logistics projects of the past that were vast in their scope and challenges. It was the author’s own curiosity about these innovations that led him to look for lessons to be learned from history’s great logistics leaders. Whether they were crossing a mountain range with an army of thousands of men, airlifting millions of tons of food, or transporting millions of sandstone blocks to build a monument, the logisticians profiled in this book all had to strategize, coordinate, and then carefully implement their plans in order to overcome great obstacles and achieve success.

But the author is not content to remain in the past. Issa Baluch clearly has a vision for the possibilities that the future holds for global trade and transport; therein lies the great value of Transport Logistics: Past, Present and Predictions. Today’s freight logistics providers, like their historical counterparts, also face major obstacles and daunting challenges, from changing trade regulations to new technologies and new sources of competition. Their importance as links in complex global supply chains cannot be overstated. If they are to succeed, they must be equipped to compete and evolve, and resources like this book can help them do so.

HH Sheikh Ahmed bin Saeed Al-Maktoum

President, Dubai Department of Civil Aviation

Chairman, The Emirates Group

FOREWORD

Transport logistics is one of those things that almost no one knows happens until it doesn’t. When I became Federal Maritime Commissioner in 1990, I walked into an industry in the midst of change, driven by the surging economics of just-in-time deliveries, declining transport revenues, and outmoded regulatory constraints.The dot-com bubble was barely a spark in anyone’s eye. What I found as a newcomer was that change wasn’t being driven by the transport providers so much as by cargo owners—and their agents, men and women like Issa Baluch, who really tied the threads together in the inter-modal process, moving the goods, the documents, and the money.

When Issa Baluch speaks, people listen. Thirty plus years of experience as one of the great innovative freight forwarders not only in the Middle East but around the world of global commerce make him a recognized, effective voice not only for his profession but for its customers. Whether the issue is trade security, food aid, or just the everyday commerce that knits together what New York Times columnist Tom Friedman has called the “flattening” world, his experience shows through. The men and women worldwide who manufacture and move the goods that make our commercial lives possible; the military logisticians who move the men and materials needed to protect our societies and project national will; the countless builders, buyers, middlemen, financiers, transport providers; and the millions of others who daily carry out or depend on the free flow of goods—all will find something new and useful from Issa Baluch’s professional observations and experiences.

What makes this book particularly meaningful, however, is Issa’s strength and perceptiveness as an historian. History lends context to our own efforts in the twenty-first century. From the ancient (the Biblical effort of Noah’s Ark, the still powerful pyramids, the wartime exertions of Hannibal and his elephants), to the modern (the birth of the Panama Canal, the D-Day invasion, the relocation of Abu Simbel, and more), Issa Baluch shows us the great feats of not only commercial but also military logistics. He does this in a new light, crisply, clearly drawing lessons that have relevance to modern times: the need for planning, clarity of purpose and visibility into process; strategic use of assets; flexibility and resourcefulness; clear communications; and above all else, the need to innovate.

In speaking to his profession, he is equally direct: integrate fully into the global supply chain or perish. Issa speaks urgently to the need to link the movement of goods to the capture, organization and movement of information. He is an articulate spokesman for those who are concerned about the new vulnerability of our supply chains and logistics processes and their potential misuse as conduits for the terror that haunts the modern world. And he brings us into the unique world of trade in the Middle East and Asia, with thoughts that apply not only to transportation professionals but to those who rely on their services. This is a book from which everyone can learn something, and from which all of us will profit.

Rob Quartel

Former Member, US Federal Maritime Commission

CEO, FreightDesk Technologies

ACKNOWLEDGEMENTS

The author wishes to acknowledge the following individuals and organizations for their input and assistance in the development of this book. Their round-the-clock support, even during weekends and time off, made it possible to complete the project.

HH Sheikh Ahmed bin Saeed Al-Maktoum, Rob Quartel, Sultan Ahmed Bin Sulayem, Gary Bartek, Tarek Sultan Al-Essa, Lynn C. Fritz, Hwang Teng Aun, Dora Kay, Ram Menen, William G. Pagonis, Bruno Sidler, the International Federation of Freight Forwarders’ Associations (FIATA), and the National Association of Freight and Logistics (NAFL).

Advisors: Charles Dey, Chris Gillespie, Keith Horn, Luo Kaifu, Manfred Kiel,John MacKenzie, Abbas Makki, Ismail Pawane, Kevin Penman, David Pierce, Frank Raj, Rudi Sagel, and JP Tseng.

Walid Badr

Mohammed Badran

Manfred Boes

Mayur Contractor

Mark D’Souza

Hiren Dragacevic

Rizal Endiafe

Capt. Mansoor Y. A. Ghafoor

Ali Al-Jallaf

Mustafa Khamis

Bethany Kriss

Perihan Labib

Eng. Hussam Leheta

Li Limou

Herbert Liou

Zack Lynch

Peter Maegerle

Admiral Horacio Mayorga

John McNicholas

Abbie Nixon

Sarosh Nagarvala

Bruce Naiker

Hamdi Osman

Vijay Panchmatia

David Phillips

Heiner Rogge

Gladson Ronad

Marco Sangaletti

Bayani Santos

Nazli El-Shazli

Bill Spohrer

Ashok Thomas

Raju Viswanathan

Amanda Wu

Yang Guangqi

Xiaodong Wang

Zhao Huimin

Zong Jincai

INTRODUCTION

Logistics Innovation in the Stories of Noah and Joseph

When I look back on transport logistics throughout the course of history, it becomes clear that the freight logistics tasks we carry out today by no means reinvent the wheel. Since ancient times, humans have been confronted by the basic challenge of transporting goods and people from point A to point B. I have often wondered about the first logistics manager in history. Surely, this would be a difficult character to identify.

The stories of Noah/Nooh ‘AS’ * and Joseph/Yusuf ‘AS’ from the Bible and the Holy Qur’an demonstrate just how far back we can find transport logistics in practice. Perhaps we could even consider them history’s first logistics pioneers. The story of Noah/ Nooh ‘AS’ is familiar to many people. Most of us probably do not think of it in terms of transport logistics, but a closer look shows that logistics management was indeed practiced in this situation. According to Genesis, God was displeased with human sin, so he decided to wipe out the human race by flooding the whole earth. He found one righteous man named Noah, and chose to save him and his family. God commanded Noah to build a boat 140 meters long, 23 meters wide, and 13.5 meters high (159 feet long, 75 feet wide, and 44 feet high), and to fill it with one male and one female of each kind of animal living on earth. This cypress-wood vessel was to be built with three decks, a side door, and a roof, and was to be covered with pitch.

While we do not know exactly how Noah went about this task, we can be sure that the project placed tremendous demands on him in terms of transport logistics. First, the ark’s construction called for the transport of building materials to the construction site, a stupendous task indeed.

Then he faced the task of procuring two of each kind of animal, loading them onto the vessel, and providing them with food and water. The same provisions had to be made for his family as well. We can speculate that Noah had to coordinate waste removal, plan for heating and ventilation, and provide adequate manpower to care for the animals. These resources had to last during 314 days of flooding, though at the outset, Noah did not even know how long they might be afloat. According to the Bible story, it was up to Noah to ensure the survival of the human race as well as every kind of animal.

This story is also found in the Holy Qur’an, which says that Nooh ‘AS’ built an ark of broad planks and caulked it with palm fiber, filling it with his family (except for one son, who chose not to enter the ark) and two of each kind of animal. The flood killed everything on earth, except for Nooh ‘AS,’ his family, and the animals they saved in the ark.

Later in Genesis, we read about another ancient logistics manager named Joseph, who was called out of an Egyptian prison to interpret Pharaoh’s dreams. In doing so, he offered a dreadful prediction: after Egypt enjoyed seven years of plentiful harvests, seven years of famine would strike the land. The Qur’anic version of the story says that Yusuf ‘AS’ also predicted one year of abundant water before the famine.

Joseph advised Pharaoh to appoint supervisors who would warehouse one-fifth of the total crops produced during the seven years of plenty. These stores would then be available during the famine. In the Qur’an, Yusuf ‘AS’ suggested a way to feed Egypt during the famine, indicating a specific cultivation method that would yield bumper crops: the Egyptians were to harvest only the grain that they needed to eat, and then store the rest in the ear to preserve it from insects that might attack the warehouses. With that, Pharaoh recognized Joseph’s wisdom and made him the chief administrative officer in charge of the treasury, justice, and the execution of royal decrees.

Joseph’s logistics challenge was a staggering one: to store enough food to feed everyone in the country for seven years. During the seven years of plenty, he traveled throughout Egypt and, in each city, gathered food from the surrounding fields. He used his expertise in logistics management to set up central warehouses for the extra grain. Genesis says he warehoused as much grain as the sand of the sea.

When the famine struck, Joseph had to use various distribution channels to get the food to hungry people. He also had to ensure that the pricing of food during these difficult times was fair to all consumers. Joseph had warehoused enough to feed not only Egypt, but also people from all over the world who came to Egypt for food. These people surely owed him their lives. As Egypt’s chief logistics engineer, he was able to feed the people of numerous countries and in doing so bolster Pharaoh’s political power. Joseph’s achievements in logistics management and distribution would be remarkable even in today’s world of automated inventory management and express distribution by air. The massive undertaking of feeding the whole world required careful planning and demand forecasting. It is an ancient example of logistics as we know it today: the placement of the right goods at the right place, at the right time, and at the best price.

Scope and Objectives

The transport of goods and people is clearly a basic human necessity. We will identify in Part I a wide variety of projects that called for transport logistics. The need for a shortened route through the Americas led to the digging of the Panama Canal, which required the relocation of millions of cubic meters of earth (Chapter 5). Security problems led various Chinese dynasties to build sections of the Great Wall, which required the transport of building materials to remote mountaintops (Chapter 3). Patriotic and spiritual influences inspired the construction of monuments such as the Great Pyramid and the Forbidden City, which both required innovative methods to transport building materials (Chapters 1 and 3). A diplomatic standoff between the world’s emerging super-powers required airlift capabilities at the beginning of the Cold War (Chapter 6). Military operations obviously require the mobilization and transport of resources, human and otherwise, on a massive scale (Chapters 2, 6, 7, and 9). Finally, humanitarian emergencies demand the speedy provision of food, water, and shelter to displaced persons (Chapter 15). Whether these projects were for military, humanitarian, or engineering purposes, they all required transport logistics.

Each case study of a historical great project will consider the following questions:What aspects of this project required transport logistics? What demands did the project place on logisticians, and what did they plan and implement in response? Did execution match up with planning? Are there any lessons we can learn from their methods and innovation, and from the logistics principles that governed the operations?

It was not easy to narrow down the many possible case studies to a workable number, and I am grateful to all those colleagues who suggested various historical events. We could have examined many more cases, for history provides an array of projects that exemplify the best and worst in logistics management. I settled on these projects in order to demonstrate the wide range of activities that necessitate transport logistics management. Some projects were successes and some were failures, but they will all help us gain new insights on age-old challenges, and hopefully on the industry today.

All the projects in the book had key figures behind them who were responsible for their success or failure, though some are easier to identify than others. These individuals were able to motivate their people, implement new ideas, try new things, and break with tradition. I hope these case studies will help you see the “movers and shakers” of the past in a new light.

The second part of the book examines various aspects of today’s dynamic freight logistics industry, including the changing role of the freight forwarder. With the development of IT-based supply chain integration and value-added service offerings, the freight forwarder is being forced to evolve, or else risk extinction. In addition, ensuring cargo security has become an irreversible part of the forwarder’s responsibility to customers and other supply chain partners. Finally, an examination of the freight logistics industries of Egypt, China, South Africa, India, and Dubai (United Arab Emirates) provides some perspective on the varied environments in which forwarders operate and illuminates the need for trade and transport facilitation as a means to economic growth.

In the book’s third and final section, we will look at the future of the transport logistics industry, which will continue to evolve as a result of globalization, the digitalization of information, new technologies, rising energy costs, and changing trade patterns. I will emphasize the importance of training and highlight the roles of national and international associations in developing a culture of quality, security, and innovation in the freight logistics profession.

Finally, a word about what led me to write this book. History’s monumental projects remain the wonders of the world today. Structures such as the Taj Mahal, the pyramids, and the Great Wall of China stand testament to years of design, planning, and hard work carried out by visionary people hundreds and even thousands of years ago.Yet over the past few years, as I have been called upon to make presentations and speeches, I have found little accessible reference material on the logistical aspects of these projects. I have been privileged to grow into the freight logistics industry, and I realized that I wanted to give something back to it. The best way to do so seemed to be by studying and analyzing those elements, past and present, that have made this dynamic industry what it is today.

* Peace be upon him.

A NOTE ON WEIGHTS AND MEASUREMENTS

US tons are denoted with one star(*) and UK tons are denoted with two stars(**). Where no distinction is made, it should be understood that the source material did not distinguish between UK and US tons. All other measurements are listed both in SI (metric) and English units.

PART I

Past

ANCIENT EGYPT

Sources of Construction Material for

the Great Pyramid at Giza

CHAPTER 1

BUILDING THE GREAT PYRAMID:

ANCIENT SUPPLY CHAINS ON THE NILE

“Barber estimated that it would take a force of 900 men harnessed in double rank on four dra ropes to drag a 60- ton ** monolith... Barber says that such a force would have no trouble dragging the stone, especially if they were drilled to pull together; he concludes that for this reason men and not animals are pictured hauling wrought stones: men could be drilled to march in absolute cadence to a song or time-keeping instrument. A ‘one-two-three surge,’ says Barber, produces a momentary force represented by nearly the weight of the whole mass of men, or several times their ordinary pulling force. Also, vacancies in the ranks caused by sickness could be filled without materially affecting the drill of the remainder. Ca le could never be so well organized.” 1

Peter Tompkins

Central transport logistics challenge: quarrying, transporting, li ing, and placing two million blocks of granite, some of them weighing as much as 50 tons.

The Great Pyramid and its two siblings at Giza have attracted travelers of all kinds in their 4,500-year history. Some have come to plunder its wealth, some have come to explore its spiritual history, some have come in appreciation of its construction, and some have come to unearth the clues it gives to an ancient way of life. Today, archaeologists, Egyptologists, and engineers all over the world study its construction and attempt to understand the manner in which granite and limestone blocks weighing 50 tons were transported to the site and raised to such a great height. Whatever the answers to their technical questions, the evidence of a tremendous transport logistics operation remains. The Egyptians responsible for building the Great Pyramid coordinated the quarrying and movement of two million blocks of stone, the pyramid’s construction, and the hiring, feeding, clothing, and housing of a 30,000-man work-force (and perhaps their families as well). This was a project that most likely took 20 to 25 years to complete, meaning that it called for thorough planning at the outset and careful project management as it progressed. The Great Pyramid at Giza, then, provides our oldest conclusive example of a major transport logistics project. While the facts of its construction remain shrouded by the passage of a few thousand years, its complexity, size and technical accomplishment merit closer examination.

The Great Pyramid was built around the year 2600 BCE by Khufu, also known as Cheops, Pharaoh of the Fourth Dynasty (c. 2680-2565 BCE). Standing 146 meters (451 feet) high and covering thirteen acres, it is two-thirds the size of the Hoover Dam. The outside of the pyramid was covered in a casing of fine white limestone from the Muqattam range on the east bank of the Nile River, or perhaps from quarries in Abu Rawash. 2 The casing has since been stripped away by looters, so we can only imagine the brilliance of the newly-built pyramids shining in the sun. Two million blocks of limestone and granite, weighing from two to six tons each, were used to build it. Some of the granite beams quarried at Aswan and brought down the river on barges weighed more than 50 tons. (See map page 24.) Building the interior King’s Chamber required that granite blocks of 40 to 60 tons be raised to a height of 70 meters (299 feet).

When Medieval Europeans heard of the pyramids, they assumed that they were storehouses for Joseph’s grain. This idea originated in the Byzantine East and became popular thinking in Western Europe during the fourth, fifth, and sixth centuries. 3 But pyramids were actually built in order to worship the dead—they were part of an ancient state religious cult that placed great emphasis on the deity of the Pharaohs. The Egyptians believed that when the Pharaohs died, they went to be with other gods. The pyramid complex was considered the site of the pharaoh’s transfiguration, rebirth, ascent to heaven, and residence in eternal life.

Many scholars have offered estimates as to how many men worked on Cheops’ pyramid. The Greek historian Herodotus, who traveled to Egypt in the 400s BCE, is the first known person to have written about the pyramids. Herodotus says that when Cheops came to power he “bade all the Egyptians work for him.” Later in his account, he writes that 100,000 men worked for three months at a time. 4 Egyptologist Miroslav Verner calls this estimate “fantastic.” 5 Ludwig Borchardt and Louis Croon, who assume that work went on throughout the year, estimate that 36,000 men worked at Giza, 6 a number that fits within the 20,000-30,000-man range proposed by most Egyptologists.

What is clear is that the Egyptians patterned their work-force after their highly organized society. When they began work on the Great Pyramid, they were building upon 1,000 years of civilization, so work-force organization was not a new challenge. Workers were most likely organized into teams, each consisting of a few hundred men and one leader—smaller groups were probably responsible for transport because they could be more easily coordinated to ensure the prompt delivery of construction materials. 7

Egyptologists agree that the workers were not slaves, but paid, skilled men. Permanent workers’ settlements were probably built around the site. While a basic work crew most likely lived and worked at Giza all year round, it is possible that farmers also came to work on the pyramid while their fields were submerged by the Nile’s annual flooding. Herodotus says he found a record on the pyramid showing that 1,600 talents of silver had been spent on radishes, onions, and leeks for the workers. He claims that there was also a record there of how much bread and clothing the work- force required. 8 While Verner questions the accuracy of this record, one text found at Saqqara implies that the State fed, clothed, and lodged its workers. This text is a sixth dynasty papyrus letter from a supervisor complaining that clothes for workers were not delivered on time, delaying work. 9 We can assume that the Egyptian State had some basic responsibilities to its workers: providing emergency care, a reliable water supply, and sick relief, and making sure that all workers were always usefully employed.

In addition to the massive human resources operation necessary for organizing so many workers, pyramid builders also had to exercise strategic site selection. Giza was chosen as a pyramid site for a number of reasons. It had stable subsoil, abundant limestone supplies nearby, and was close to the Nile, which would be convenient for transport. This is a classic case of the relationship between engineering and transport logistics. While the pyramid builders may have used marvelous engineering techniques to erect the 2.3 million blocks, the entire project depended on the efficient transport of these blocks from quarry to construction site. The transport requirement was of such great importance that it was a factor in site selection, one of the first steps in the process. The limestone quarries used to source the blocks were worked by laborers grouped into various expeditions. Unskilled labor was used for this task, but there had to be a clear organizational structure to the process because millions of blocks had to be cut from the rock using only wooden mallets and copper chisels. As the blocks were cut away, they were numbered and registered, then dragged from the quarries to the banks of the Nile on wooden sledges pulled by men and oxen.

The pyramid builders made good use of the Nile, bringing massive blocks on barges from quarries at Aswan and Tura. The cargo (blocks, slabs of limestone, and huge granite obelisks) did not sit directly on the decks of the barges. Instead, it rested on beams and girders to relieve some of the pressure on the decks.

Planners took advantage of the annual floods, when the Nile was so full that it could carry the barges all the way to the foot of the plateau construction site. They also created artificial canals for the barges—Because of the weight and size of the blocks, the logisticians’ goal was to get the barges as close to the construction site as possible. The next task was unloading the slabs. It is possible that an earthen embankment was built up as high as the barges’ decks so that the slabs could simply be slid off. Another possibility is that the barges were brought into a narrow canal where beams resting on the banks were put under the obelisk/block to lift it. The ship would then be weighted down and slipped out from under the heavy rock.

Once the slabs were unloaded at Giza, there remained the task of transporting them up the hill to the pyramid. For this purpose, workers constructed a long causeway. The causeway leading up the hill from the Sphinx to the pyramid of Khafre (built c.2555- 2532 BCE) can still be seen at Giza today. According to Herodotus, workers spent 10 years building the causeway to the Great Pyramid. 10 It had to be made of a hard material—not sand—so that the sledges carrying the blocks and columns could slide over it. According to Peter Tompkins, men, not oxen, probably pulled the stones, because men could be better trained to work together than could a team of livestock. 11 Grease was then put under the sleds to reduce friction as they were pulled up the hard hauling tracks. Laborers might have used alluvial mud as a lubricant underneath the heavy blocks, or they might have slid the blocks over rolling logs. Harvard University archaeologist Mark Lehner learned from a pyramid construction experiment that twelve men could easily pull a 1.5-ton * block over a slick surface. 12 Therefore pulling a block weighing 50 tons would require the labor of 400 men. Archaeologists and Egyptologists still debate whether the builders used ramps to lift the blocks up to the top of the pyramid, or whether they used some type of lifting device, such as a lever. Because pyramid building was spread over so many years and undertaken by so many different dynasties, most Egyptologists and archaeologists assume that a combination of ramps and other lifting devices were used. Experts also debate the type of ramps used. Perhaps a single ramp wound its way around the pyramid. 13 (Figure 1.1) Others suggest that a spiral ramp was built on the ground leaning against the pyramid, or zigzagging up one face (Figure 1.2), or inside the hollow shell of the pyramid. 14 British archaeologist William Petrie suggested that a single vertical ramp went up one face of the pyramid. His idea was that this ramp, made of bricks, clay, sand, and round wooden beams, was made higher as the pyramid grew. 15 (Figure 1.3)

Verner concludes that both ramps and lifting devices were used—he agrees with the proposal made by renowned Egyptologist Jean-Philippe Lauer, stating that a system of ramps was built for the construction of the Great Pyramid, each a different size and gradient. Other tools and lifting devices, such as wooden levers, round beams, poles, and ropes were probably also used. 16 Lauer proposes that one ramp was built vertically up each of three of the pyramid’s sides, while another ramp ran from the fourth side all the way down to the nearby quarries. This fourth ramp went high enough on the pyramid to erect the Great Gallery and the King’s Chamber inside. A series of smaller ramps was probably built inside the pyramid as well. Lauer proposes that counterweights made of sacks of sand were used to set the blocks in place. To place the final piece on top he assumes the use of wooden trestles, greased beams, thick ropes, and sandbag counterweights.

Summary

The magnitude of the Great Pyramid’s transport logistics challenges should be very clear, especially to those who have visited Giza (or any other pyramid) and have seen its breathtaking size with their own eyes. Logisticians responded to these challenges by utilizing resources like the annual flooding of the Nile, their strategic proximity to quarries, and a large labor force that seemed to be dedicated to the project for religious reasons as well as duty to State. When it came to hoisting these heavy blocks into place, logisticians relied on the most high-tech cranes possible at that time: pulleys, sandbag weights, levers, and greased beams. It is near impossible to identify the chief individuals who were responsible for overseeing transport logistics for the Great Pyramid’s construction, but it is clear that they possessed both engineering prowess and skill in transport logistics.

While Cheops’s pyramid is unique in its size and complexity, pyramid-building techniques had been evolving since the construction of the first limestone pyramid during the Third Dynasty (2780-2680 BCE). It is unclear whether the techniques used to build the Great Pyramid were innovations or whether they were established practices, but there is no doubt that the long history of pyramid building helped the project along.

Human resource management will appear in all of the projects we study, and the Great Pyramid is no exception. In addition to clothing, feeding, and housing a work-force of thousands, project managers had to mobilize experts in many fields and encourage cooperation among many different players. As noted earlier, it is interesting that in some cases, human laborers were preferred over animals because it was easier to train them to work together. While animals can provide only brute strength, human workers can provide brute strength as well as the mental determination necessary for such a project.

A 20-year project of this magnitude required not only the mental determination of laborers pushing stones up ramps, but also dedication by the entire work-force. Because few construction projects today last as long, it may be difficult to imagine the dedication required to complete the Great Pyramid. However, Egyptian pyramid builders were not working on a mere commercial endeavor—they were working for the purpose of honoring their gods. Perhaps this religious commitment bound the builders to the Great Pyramid throughout the project, from vision to reality.

1 Tompkins, Secrets of the Great Pyramid, 223.

2 Verner, The Pyramids: The Mystery Culture and Science of Egypt’s Great Monuments, 195.

3 D’Hooghe and Bruwier, The Great Pyramids of Giza, 11.

4 Herodotus, An Account of Egypt.

5 Verner, The Pyramids: The Mystery Culture and Science of Egypt’s Great Monuments, 63.

6 Ibid., 76.

7 Ibid., 80.

8 Herodotus, An Account of Egypt.

9 Verner, The Pyramids: The Mystery Culture and Science of Egypt’s Great Monuments, 81

10 Herodotus, An Account of Egypt.

12 Tompkins, Secrets of the Great Pyramid, 223.

13 Interview, Zahi Hawass (Director General of Giza) and Mark Lehner (Archaeologist, Oriental Institute of the University of Chicago, and Harvard Semitic Museum). Nova Online Adventure (http://www.pbs.org/wgbh/ nova/pyramid/explore/builders.html), accessed August 3, 2004.

14 Verner, The Pyramids: The Mystery Culture and Science of Egypt’s Great Monuments, 86.

15 Lehner, The Complete Pyramids, 214

16 Verner, The Pyramids: The Mystery Culture and Science of Egypt’s Great Monuments, 88.

17 Lehner, The Complete Pyramids, 214.

18 Verner, The Pyramids: The Mystery Culture and Science of Egypt’s Great Monuments, 89.

HANNIBAL'S ROUTE

CHAPTER 2

HANNIBAL: PIONEERING ALPINE TRANSPORT

“What do you think the Alps are? They are nothing more than high mountains. No part of the earth touches the sky there; no height is insurmountable to men of determination. Look at these men, how do you think they got here, you think they flew over the Alps? They are simply country people from Italy. Many times, with women and children, they crossed the Alps. Surely then, you, soldiers with nothing more than your weapons to carry, can cross these mountains.” 1

Hannibal, in an address to his

soldiers before crossing the Alps

“None climbs so high as he who knows not whither he is going.”

Oliver Cromwell

Central transport logistics challenge: crossing the Alps with an army of 50,000 infantry, 9,000 cavalry, and 37 elephants.

Hannibal’s march across the Alps has amazed students and confounded scholars for thousands of years. Many have heard of the great Carthaginian general who transported elephants and an army across the Alps, but few can imagine the lengths to which Hannibal went in order to bring his army to Italy, where they battled Rome. There is disagreement as to exactly where Hannibal crossed the Alps’ formidable peaks. Our concern, however, is how he crossed and how he got an army of approximately 50,000 infantry, 9,000 cavalry, and 37 elephants to cross with him. During the third century BCE Carthage became the most prosperous and powerful city in the western Mediterranean. This city of merchants was located in North Africa near present-day Tunis, and its location helped it grow in maritime commerce. At this time, Rome, Carthage’s rival city across the Mediterranean, was still a fledgling republic and not yet a powerful empire. The Punic Wars of 264-146 BCE began when Rome started encroaching on Carthage’s Mediterranean colonies and trade routes.

Hannibal Barca was born into a world of conflict. As a nine- year-old, he pledged on an altar at Carthage never to be a friend of the Romans. 2 His father Hamilcar commanded Carthage’s forces on Sicily during the First Punic War (264-241 BCE), a conflict over who would control the island. The war ended in a stalemate, but Carthage soon extended its reach into Spain, where it used the region’s labor and mineral wealth to its advantage. The peace did not last long, however, because Hannibal lived for revenge on the empire. When General Hasdrubal (Hannibal’s brother-in-law) was assassinated in 220 BCE, Hannibal was his ablest successor. Having spent 16 years in Hamilcar’s military camps in Spain, he had learned how to be a soldier and how to survive food and sleep deprivation. This athletic and ambitious young general had even commanded the cavalry at Sicily under Hamilcar in the First Punic War. The Second Punic War lasted 17 years and was waged by Hannibal purely for the purpose of taking revenge on Rome. It began when he besieged the Roman-allied Spanish city of Saguntum in 219 BCE to punish them for their unprovoked attacks on nearby Carthaginian-controlled towns. Relations between the two powers rapidly deteriorated, and they again found themselves embroiled in conflict.

In spring 218 BCE, Hannibal left New Carthage (in southern Spain) for Rome. It is possible that the army left in three groups in order to ease congestion and make supply easier. 3 He took with him as many as 90,000 infantry, 12,000 cavalry, and 37 elephants. 4 Other sources indicate that he began with 60 elephants. 5 These elephants came from Morocco and Libya and may have had Indian trainers riding them. Standing 2.4-2.7 meters (eight to nine feet) tall, which is smaller than the African elephant, these combat- trained elephants were used to charge the Roman legion and to frighten enemy cavalry. They most likely wore armor.

Hannibal planned to march through Spain and up to the Pyrenees, the mountain range that stands on the border of Spain and France. This trip took two months, and after battling a number of fierce Celtic tribes on the way, Hannibal sent some of his troops back to Carthage. He probably retained about 50,000 infantry and 9,000 cavalry. 6 These men, plus the elephants, marched on toward the Alps. Hannibal may have reduced the size of the army because he was worried about feeding all of them. 7

Unknown to the Romans, who thought Hannibal was still in Spain, the Carthaginian army had already crossed the Pyrenees into Gaul (present-day France). While they did face attacks from hostile tribes, Hannibal was able to bribe many chiefs into letting his army pass without a fight. At the Rhône River, Hannibal encountered the Volcae, a Celtic tribe anxious for a fight. Here, he successfully overcame two great obstacles: first, the Volcae, who were lined up on the river’s opposite bank screaming and brandishing their swords, and second, crossing the river with 37 hydrophobic elephants. After defeating the Volcae and crossing the river, the army continued toward the Alps. First, they had to cross the Alpes du Dauphiné mountain range, which stood at 1,219 meters (4,000 feet). These presented a formidable physical obstacle, as the army faced narrow gorges, ice-covered trails flanked by sharp cliffs, and attacks by local tribes who knew the mountains well. As a result, many men were lost both to skirmishes and to falls from the narrow ledges before the army reached an even higher mountain range, the Hautes Alpes. Their summits reached 3,962 meters (13,000 feet). It was in this mountain range that a Gallic tribe of an unascertained size ambushed the Carthaginian army, which again lost many men and animals.

At last, the starving, war-weary army reached the final and most challenging pass, which led into Italy. They had come 1,609 kilometers (1000 miles), but the worst of their journey was yet to come. Hannibal stood at the summit and spoke to his soldiers with words of encouragement as they passed. He urged them to continue, showing them the view of Italy and promising them that the journey was almost over. 8 Yet, more icy conditions and a blocked trail caused the deaths of thousands more men in this final mountain range. When the army reached its camp in Italy on the other side of the pass, there were only 26,000 men left. It was the fall of 218 BCE, and nearly all of the pack animals had been killed or eaten along the way. Somehow, all of the elephants and some of the horses had survived the five-month journey. 9

While the Carthaginian army camped in the Po Valley, Hannibal used his spies to find out where the Romans were. After baiting them, Hannibal defeated the Romans at the Ticinus and Trebbia Rivers, at Lake Trasimene (giving him control over northern Italy), and finally at Cannae on the southeast coast. In the latter battle (216 BCE), Hannibal killed 50,000 to 70,000 Romans and gained control of most of southern Italy. However, he failed to take Naples, which meant that he was unable to set up a southern Italian port to receive supplies from Carthage. Cut off from its supply lines, Hannibal’s army retreated into the Italian countryside. The Roman army followed Hannibal from place to place until 202 BCE, avoiding any large-scale battles in what became a war of attrition.

Strategy and Challenges

It is possible that Hannibal chose such a challenging land route because it was his only option. The Romans controlled the Mediterranean Sea. Hannibal recognized the strength of the Roman army and knew they would defeat him if they were to land in North Africa. He believed that if he could get to Italy and win a few major battles, most Romans would defect to his side. 10

Alternatively, he may have chosen his route because of lessons learned from his father’s logistical errors. During the First Punic War, Hannibal and Hamilcar were stationed on Sicily, where they were utterly dependent on ships from Carthage for their supplies and reinforcements. Due to the failure of the Carthaginian navy and lack of support from politicians at home in Carthage, the army lost their supplies and the war. 11

Though Hannibal avoided some logistical challenges by choosing the land route to Rome, he faced the obvious problems of fixed resources, limited time, and human as well as physical obstacles. Meeting these three challenges required a thorough logistics strategy.

Fixed Resources

Historian John Prevas estimates that the Carthaginian army would have consumed up to a ton * of food each day. Each soldier would burn 4,000 to 5,000 calories per day marching and even more during combat. Where would Hannibal obtain this much food, especially when crossing barren terrain populated by barbaric tribes? One of his generals proposed that the soldiers be conditioned to eat human flesh, but Hannibal refused. 12 The less- brutal option was to continually restock supplies along the way. Water was plentiful, as the army passed many rivers and streams, and food could be hunted and gathered from the countryside. This group of fighters was eager to take crops and livestock by force from the villages they passed. In fact, some villages and tribes agreed to supply the army with cattle and other resources in exchange for immunity from death or slavery. (They also provided scouts for the army in certain areas.) 13 In addition, Hannibal was careful to camp in areas where there were grass and grain fields nearby, providing for the pack animals as well as the soldiers. 14 Hannibal may have sent out spies to secure allies and supplies along the route to Italy before the Second Punic War even began.

Thousands of mule and oxen accompanied the army, dragging siege engines, battering rams, and catapults. At the rear of the line of soldiers, a ragged group tagged along: blacksmiths who repaired the horse’s shoes, merchants who plundered and profited from the spoils of dead bodies and ravaged towns, cobblers who mended the soldiers’ boots, and various slaves picked up along the way. This entourage existed solely for the support of the soldiers and their animals; their presence played an important role in meeting the army’s day-to-day needs.

Limited Time

Hannibal wisely sent scouts into the Alps before he attempted the journey, and they discovered that an Alpine passage was possible only before snowfall. This, therefore, gave Hannibal a limited amount of time to cross. As a result, he had to save time along the way by carefully choosing his fights with warring tribesmen. He preferred bribing the tribes to let him pass rather than fighting with them and losing precious time, men, and other resources.

Physical Obstacles

One of the most famous challenges Hannibal faced was transporting his 37 war elephants. Though we cannot be certain how he got them safely every step of the way, some records do explain how they were ferried across the Rhône River in Gaul. Even their drivers’ fiercest prodding could not convince them to enter the water, so logisticians innovated by constructing a makeshift bridge made of rafts that could be pulled back and forth across the river. This may have seemed like the perfect solution, but it was not so, for once the bridge was completed they discovered that the elephants would not walk onto it. Even spreading grass and dirt on the pier to make it look like an extension of the riverbank would not convince the elephants to venture out. One driver goaded a ferocious elephant so much that the animal threw him off and began chasing him. When the driver ran into the river for safety, the elephant chased him in. Fortunately, some of the other bulls followed suit and were carried by the current to the other side of the river.

However, the majority of the elephants were still standing on the riverbank.Their drivers were able to prod two females onto the rafts, and the males followed. When all of the elephants were on the rafts, they were cut loose and drifted into the river, where they panicked and capsized the rafts. They survived by walking across the river, perhaps with their trunks raised above the water for air. 15 To ferry his men across the river, Hannibal purchased boats, rafts, and canoes from local tribes.

Once Hannibal got to the high peaks of the Alps, he must have realized that the rivers were the least of his worries. The narrow trails featured a deadly combination of ice, snow, avalanches, steep precipices, and the frozen slush that develops when thousands of boots and hooves walk over the snow. The most Hannibal could do to lessen the danger of these mountain passes was to use local tribesmen as guides to find the best routes.

The climb down from the last pass into Italy was worse than the climb up. The path that scouts had marked out weeks before was obscured by new snow, and the ice had to be cut away to make a footpath. At one point, a landslide had destroyed the ledge, making the area impassable. Hannibal’s first idea was to construct a new trail above the blocked ledge, but this turned out to be even more dangerous. As the new trail became steeper, a number of soldiers slipped on the ice and slid over the side of the cliff, falling to an inevitable death. Many were so exhausted that they could not walk any more—these men lay on the side of the trail and waited to die.

When it became clear that constructing a higher route was not feasible, the engineers developed a new plan for getting around the destroyed ledge: create a new track on the ledge, replacing the parts of the ledge that had been destroyed by the landslide. They set to work, but soon encountered a large boulder blocking the path. Their solution was to render the rock friable, a process that had been used by farmers for centuries to clear their land of large rocks. Large amounts of firewood were passed up the trail to feed a huge fire that was built under the rock. The fire raged for days and heated the rock to the extent that, when they poured the soldiers’ rations of sour wine (vinegar) over it, the acetic content caused fractures in the rock. With picks and axes, they were able to cut away enough of the boulder to continue building the track. It took one day to make the new path, and three more to make it passable for the elephants. Four days later, they had completed and widened the track, and the entire column, including the elephants, made it safely to the valley below.

Human Obstacles: The Enemy Within

We must also consider that Hannibal was responsible for motivating thousands of men to undertake this bleak journey. Because the Carthaginians were merchants and not soldiers, they hired African, Spanish, and Gallic mercenaries to do their fighting. These were men who may have shared Hannibal’s hatred of Rome but who also had little allegiance to Carthage. Their only incentive for the trek was the loot they could gather from the villages they destroyed along the way.

Before they set off, Hannibal told his men that the Gauls on the other side of the Alps would join them to fight Rome. He promised them that they could take spoil from Gaul. He praised them for their courage and strength. Prevas says it worked—that the army, “ignorant of what lay ahead, was swept up by the passion of the moment and the eloquence of the speaker, and roared its approval.” 16 The Greek historian Livy also records a motivational address that Hannibal gave his men to allay their fears as they entered the Alps. Hannibal was clearly an eloquent orator who convinced his men of the importance of setting the world free from Rome’s oppression. He again built them up, reminding them of the distance they had traveled and how many obstacles they had overcome so far. 17 This was human resource management at its finest. Consider the management skill and persuasive ability necessary to maintain control over an army of mercenaries while marching and fighting on foreign soil for 15 years. Even more remarkable is the fact that Hannibal never experienced a mutiny in his ranks.

Human Obstacles: The Enemy on the Road

To further complicate Hannibal’s job, the road to Rome was populated by barbaric tribes who did not hesitate to attack the army in search of loot. Ferrying thousands of men, pack animals, and elephants across the Rhône River was difficult enough—but Hannibal also had to contend with the vicious Volcae warriors, who stood on the opposite bank of the river taunting him and his army. This was a transport challenge and military challenge at the same time. Hannibal responded by subduing the enemy first and securing the river for his army to cross. He sent one of his commanders with a cavalry unit across the river at a different crossing point, where they camped for a night and prepared to surprise the Volcae from behind. At the same time that thousands of Carthaginians started crossing the river the next morning, ready for combat on the other side, this commander charged the Volcae from the rear, confusing them and forcing them to disperse in panic. The Rhône was now free and the army could proceed with ferrying troops, animals, and supplies as detailed earlier in this chapter.

Summary

Generations of generals have studied Hannibal’s historic achievement, specifically his military tactics and strategy. Military actions require the management of fixed resources, risk assessment, careful timing, and proper human resource management, so Hannibal’s passage through the Alps makes a good example for generals. However, transport logistics operations require the same principles, so perhaps logistics managers, too, should consider modeling their “campaigns” on some of Hannibal’s practices. He was clearly a two-in-one leader, in that he simultaneously acted as a military strategist and logistician.

It is fascinating to see how Hannibal utilized multi-modal transport in its most primitive sense. Multi-modal transport today means incorporating transport modes such as sea, air, rail, and road. Freight forwarders optimize these modes and create value for customers by finding the most cost-effective and timesaving route for their cargo. Hannibal, however, had a choice of only a few primitive transport modes: soldiers (who must have carried some goods), pack animals, elephants, and rafts. He may not have had today’s high-tech transport resources readily available, but he succeeded because he possessed a combination of foresight, planning capabilities, skill in human resource management, strategy, leadership, and determination.

1 Prevas, Hannibal Crosses the Alps, 98.

2 Porter, “At Lake Trasimene, Hannibal Barca combined tactics and psychology to destroy a Roman army,” 12.

3 Goldsworthy, The Punic Wars, 158.

4 Prevas, Hannibal Crosses the Alps, 84.

5 Porter, “At Lake Trasimene, Hannibal Barca combined tactics and psychology to destroy a Roman army,” 12.

6 Pennell, Ancient Rome: from the earliest times down to 476 A.D., chap. XIV.

7 Prevas, Hannibal Crosses the Alps, 86.

8 Ibid., 145.

9 Porter, “At Lake Trasimene, Hannibal Barca combined tactics and psychology to destroy a Roman army,” 12.

10 Levin, “Rome vs. Carthage: The Day the World Trembled,” 61.

11 Prevas, Hannibal Crosses the Alps, 56.

12 Ibid., 62.

13 Ibid., 123.

14 Pennell, Ancient Rome: From the earliest times down to 476 A. D., chap. XIV.

15 Polybius, Bk. 111, Sec. 46, cited in Prevas, Hannibal Crosses the Alps, 96.

16 Prevas, Hannibal Crosses the Alps, 57.

17 Ibid., 98.

CHAPTER 3

THE GREAT WALL AND THE FORBIDDEN CITY:

CHINESE INNOVATION IN TRANSPORT LOGISTICS

China has emerged as a major economic superpower in the new global economy. As trade with China increases, so does the quality of its transport infrastructure and its skill in doing business with the outside world. However, for now, we will take a closer look at China’s rich heritage in transport logistics.The construction of the Great Wall of China and the Forbidden City provide some clues about Chinese innovations in transport logistics in ancient and medieval periods.

The Great Wall of China

“Few who have stood on the Ming Great Wall would dispute the statement that the defence took more people to build, more time to build, and more material to build than any other in human history. The interaction of these three superlatives translates into a human story with few parallels: that of the fate of the millions of Chinese people who worked in quarries, at kilns, and on the mountainsides, levering and carrying rock slabs, bricks, timber beams and mortar up to their eventual place of use.” 1

William Lindesay

Central transport logistics challenge: transporting building material for a 2,400-kilometer (1,491-mile) wall, built over a period of 2,500 years.

The Great Wall of China is the world’s largest military structure, a 2,400-kilometer (1,491-mile) barrier built over a period of 2,500 years to protect China from invaders. It extends from the Jiayu Pass in the west to the Bohai Sea in the east. The Wall was built in different sections during different dynasties, and it covers varied terrain ranging from rugged mountains and deep ravines to flat grasslands and deserts.

While three of China’s borders are protected by geographical features, the north has historically been open to attacks by nomadic tribes. Ancient horsemen made quick and efficient thieves, while Chinese armies were slower because they consisted of foot soldiers scattered all over the country. Beginning in 1027 BCE, the Zhou Dynasty started building small, strategically located walls to keep out invaders. This pattern continued through the Spring and Autumn Period (770-476 BCE) and the Period of the Warring States (475-221 BCE).

By 290 BCE, an extensive network of short walls spread across northern China. Some of these walls were connected under Emperor Qin Shi Huang, who unified China for the first time in 221 BCE and founded the Qin Dynasty (which lasted until 206 BCE). The First Emperor, as Qin Shi Huang called himself, ordered his military commander Meng Tian to subdue the northern nomads and fortify the northern frontier. Under the First Emperor 5,000 kilometers (3,106 miles) were added to the wall, and the completed wall was called the 10,000 li (which means 5,000 kilometers).

Projects like the Great Wall placed great taxation demands on the Chinese people. Under the First Emperor’s unified China, a new civil service system provided government employment for public works. Four hundred thousand peasants per year were conscripted to leave their families and help build the Great Wall. 2 The Qin Dynasty also used convicts and other unfavorable groups to complete this and other public works projects. New towns had to be built along the wall to house workers, and farmers all over China grew food for them. All of China paid higher taxes in order to supply materials and to feed, shelter, and water the workers. During the Han Dynasty (206 BCE-220 CE) the Great Wall was renovated along the Yellow River and extended west. A chain of beacon towers was added every five kilometers (three miles) in Shanxi and Hebei Provinces. At this time, the wall channeled trade in jade, gold, spices, horses, silk, and precious gems along the Silk Road trade route. It therefore benefited the Han Dynasty both militarily and economically. However, the massive project took its toll—one report says that laborers died en masse during construction, “littering the ground” and reducing the population by one half. 3 During the Sui Dynasty (581-618 CE), the wall was further repaired and extended by 1.6 million people who worked on it for over 23 years. 4

Most of the Great Wall that survives today was either built or repaired during the Ming Dynasty, beginning in the late fifteenth century CE. After suffering a military defeat at the hands of the northern Mongols, the Ming refused to continue trade relations. Mongol tribes depended on China for trade in various goods, so their refusal led to further conflict. Ming rulers could not decide whether to negotiate with the Mongols or to attempt another battle, so as a compromise, they decided to keep the Mongols out by fortifying the many small walls along China’s northern border. The Ming placed cannons, enlarged the brick and granite work, redesigned the watchtowers, and built higher walls.

By the time of the Ming Dynasty, technological innovations had made work more efficient. After a worker uprising, the Ming set up a rotating system, whereby soldiers from the south migrated north to participate in wall construction. The ministry of war introduced this program in order to spread construction tasks among all provincial military divisions, rather than overburdening the northern provinces and risking rebellion. During the Ming dynasty, each leader of a town built part of the wall where he thought the Mongols would invade. This construction method continued across China for 200 years. Any mountain passes that might be useful to invaders were blocked, and the various sections of the wall were finally connected.

GREAT WALL OF CHINA

Under the Ming the entire structure was strengthened, improved and extended using advanced engineering and architectural techniques. By 1644, the Great Wall ran from Jiayuguan in the west, past the Gobi desert, across the Yellow River, past Beijing, and all the way to the Bohai Sea in the east. The thickest and highest parts of the wall are around Beijing, where it measures at least 7.6 meters (25 feet) in height and up to nine meters (30 feet) in width.

From Emperor Qin Shi Huang to the Ming Dynasty, wall builders strictly adhered to the principle that material should be acquired locally. There were instances of material being brought long distances, but these were rare. 5 There is little textual evidence of construction techniques—scholars can only infer from the field evidence that has been left behind. However, it is clear that engineers were innovative, using local materials to save on manpower. In its earliest years the wall was made mostly from raw material such as soil, leaves, hay, and mud; these ingredients were compressed into bricks. Building techniques evolved in Eastern China so that eventually the earthen wall was coated with stones, baked bricks, and granite blocks, making a neat, sturdy, long-lasting wall. Block sizes varied, but the largest weighed 2,500 kilograms (5,511 pounds) and measured 1.65 by 0.7 meters (5.4 by 2.3 feet). These paved, mortar-bound, brick-cased walls were built solely during the Ming Dynasty (1368-1644).

When building material was unavailable locally, transport logistics came into play. A highway creates its own supply line as it is built, but a seven-meter high wall is less accessible to 2,500- kilogram blocks and thus must have presented a challenge to logisticians. Transport methods varied, starting from the very basic practice of passing material down a long line of men. This was an efficient way to move material along narrow paths, but only if there were many laborers available. Other options included one- man shoulder poles, or shoulder poles shared between two men. Ravines could be crossed by sending laden baskets along a cable.

On flat terrain, pushcarts and animal-drawn carts were used, with draught horses to pull the heaviest blocks.

The Great Wall is most breathtaking when it snakes over high peaks and suddenly drops into deep valleys. Imagine the task of moving blocks weighing 2,500 kilograms so high without the aid of any machinery. Since the project rarely involved the long-distance transport of heavy material, these unavoidable upward journeys must have presented the greatest challenge to the project’s transport coordinators. In particularly steep areas, sheep, goats, and donkeys could each be laden with two to three 12-kilogram (26-pound) bricks. Other options for hoisting the blocks included the use of rollers, winches, levers, steps, and ramps. Scaffolding and block and tackle systems were used to place blocks high on the wall. 6

The Forbidden City

“Success depends upon previous preparation, and without such preparation there is sure to be failure.”

Confucius

Central transport logistics challenge: transporting 180- and 250-ton blocks of marble 70 kilometers (43 miles) from Fangshan to Beĳing.

In 1406, the Chinese emperor Zhu-Di ordered the construction of a lavish palace in Beijing for the emperors and their many concubines and servants. It is estimated that this palace, the Forbidden City, required the labor of 100,000 planners and craftsmen and over one million workers. 7 After 14 years of labor, the result of their work was an expansive walled palace of 9,999 rooms, which would keep 24 successive emperors isolated from their subjects for 491 years. The Forbidden City stands today as a testament to careful design, spiritually-inspired architecture, ingenious transport logistics, and the work of millions of laborers, craftsmen, and artisans. While many of the curious are drawn by its mysterious tales of intrigue and political infighting among emperors, empresses, eunuchs, and concubines, we will examine the transport logistics involved in its construction. We will find that logisticians carefully utilized the transport resources that were naturally available and improvised with water and ice in an ingenious way.

Before construction began, the building process was carefully organized. Planners estimated needs for labor and materials, created drawings and models of the buildings, and set up five large storehouses near the work site for the storage and processing of building materials. Between 1407 and 1420, 200,000 laborers worked on the building site. 8

The Forbidden City, also known as the Imperial Palace, covers 3.2 square kilometers (two square miles) in central Beijing and is made of 200,000 tons * of timber, including rare hardwood from Yunnan, Guizhou, Guangxi, Hunan and Sichuan provinces which was transported thousands of kilometers, crossing mountains and rivers (See map page 52). The task of cutting down the trees and transporting them was an arduous one: some rare hardwood trees came as far as 1,500 kilometers (932 miles). After the trees were cut, the logs were rolled down into mountain gullies where they were lashed together to form rafts.These rafts sat in the gullies until mountain torrents carried them down into the rivers. Rafts then followed a network of waterways, eventually reaching the Yangtze River, which was connected to the Grand Canal. This canal is the world’s oldest. It was built in 486 BCE during the Wu Dynasty and had, for centuries, linked northern and southern China. It was restored for this project between 1411 and 1415. 9 The Grand Canal brought the logs to the Tonghui River, which carried them to a Beijing timber storage house.

The Forbidden City also contains tremendous amounts of stone, much of which was quarried in Fangshan, 70 kilometers (43 miles) from Beijing. Marble came from Xuzhou, while bricks were manufactured in Linquing (on the Shandong Peninsula), which is over 500 kilometers (310 miles) southeast. Granite was brought from Quyang County in Hebei Province. In the summer, logs were used to roll these large pieces of rock, with several hundred people working on each one.

The square bricks used to pave the main halls were produced in Suzhou and transported along the Grand Canal and the Tonghui River to Beijing. The weight of these 80 million bricks was about 1.92 million tons. * At that time, the government decreed that every official grain-carrying boat sailing to Beijing had to be loaded with 40 bricks, and every private boat loaded with 20 bricks. 10 The most resourceful transport method used during the construction of the Forbidden City centered around two large stones. The stone used for paving the Imperial Way in front of the Hall of Serving Heaven was a single slab weighing 180 tons * and measuring 3.2 meters in width, 9.6 meters in length, and 1.6 meters in thickness. It was quarried in Fangshan and in the winter, workers transported the slab to the Forbidden City by digging wells every 500 meters, flooding the road, and then pulling the piece over the resulting ice. This task took more than 20,000 workers a total of 28 days. 11

According to another account, it is likely that the ice technique was also used for a piece of marble called the Rock of Dragons on Clouds in front of the Hall of Preserving Harmony. This 250-ton ** piece of marble was transported along a 50-kilometer (31-mile) road in the same way, with workers splashing water from wells on the road at 50-meter (164- foot) intervals. The marble was cut and transported by 20,000 men and pulled with the aid of 1,000 mules and horses. 12 The Rock of Dragons on Clouds is 17 meters long, three meters wide, and 1.7 meters thick (55 feet long, nine feet wide, and five feet thick), and features an intricate carving of dragons playing with pearls.

CHINA

Sources of Construction Material for the

Forbidden City in Beijing

Summary

The Great Wall is unrivalled by any other structure in the world, in terms of the number of people who built it, the materials required to build it, and the time required to build it. What other structure can claim the labor of millions of individuals, or a construction time span of 2,500 years, or enough stone and bricks to cover 2,400 kilometers (1,491 miles)? Whether engineers used bricks fashioned from mud and straw, timber felled near the construction site, or granite blocks transported from distant quarries, the project required highly organized transport logistics and careful workforce management. Even the mandate to acquire materials locally—one which was obeyed across many generations—reflects clear, logical, logistical thinking. Logisticians were flexible enough to adjust their strategy according to their environment.

The experts who coordinated the transport of building supplies to the Forbidden City practiced a similar flexibility and utilization of existing modes. For the transport of timber, logisticians relied on natural resources such as mountain gullies, rainstorms, and a network of natural waterways, as well as a man-made canal. To transport bricks, logisticians used existing resources, namely boats that were already traveling in the desired direction. By taking advantage of freezing weather and water supplies just below ground level, they created an icy path that enabled them to move 200-ton pieces of marble over 70 kilometers (43 miles).

1 Lindesay, The Great Wall, 44.

2 Ibid., 44.

3 Ibid., 45.

4 Ibid., 45.

5 Qiao, Ancient Chinese Architecture: Defense Structures, 128.

6 Lindesay, The Great Wall, 52.

7 Ru and Peng, Ancient Chinese Architecture: Palace Architecture, 138.

8 Béguin and Morel, The Forbidden City: Center of Imperial China, 17.

9 Ibid., 18.

10 Ru and Peng, Ancient Chinese Architecture: Palace Architecture, 138.

11 Ibid., 138.

12 Chen, Tales of the Forbidden City, 16.

CHAPTER 4

TWO REVOLUTIONS AND THEIR IMPACT ON

TRANSPORT LOGISTICS TODAY

Before we examine transport logistics projects of the twentieth century, we will take a brief look at some important developments in trade and transport during two notable transitional periods: first, the Maritime Revolution, which included overseas exploration and the birth of global commerce (c. 1400-1700), and second, the Industrial Revolution (c. 1700-1900). Examining these periods of exploration and innovation will help us understand the groundbreaking achievements that have contributed to the transport we utilize today, giving us a new appreciation of the speed, ease, and convenience of transport in the twenty-first century.

Trade of goods and services is a fundamental human interaction, whether it involves traveling to the next village, city, country, or continent. Today, trade and transport have become irreversibly globalized: there are virtually no parts of the world that remain unknown, inaccessible, or unreached. In historical terms, this phenomenon can be attributed to the exploration of the fifteenth, sixteenth, and seventeenth centuries, in which European explorers and traders branched out across the globe, establishing trading posts, trade routes, and eventually colonies in lands previously unknown to them. If the Industrial Revolution of the eighteenth and nineteenth centuries gave us the machines of global commerce, then the Age of Exploration gave us the trade incentive to carry that commerce as far as possible. This is not to say that trade did not flourish in some parts of the world before the Age of Exploration—on the contrary, other trade routes had been vibrant centers of commercial activity long before the Age of Exploration and maritime travel. This includes, for example, sea-borne trade between Arabia, India, and East Africa; the overland “Silk Road” from Europe to Asia; and intra-Mediterranean trade. However, these trading activities did not lead to colonization and globalization on a worldwide scale in the same way that European trade did in this particular period.

Since the Crusades of the Middle Ages, merchants had been traversing the trans-continental Silk Road from Europe to Asia, bringing exotic spices and fabrics to isolated medieval Europeans. However, transport was slow, inefficient, and expensive. Travel along this route was dangerous and involved competition with powerful local traders along the way, so Europeans began to search for a maritime route to Asia. At the same time, the Continent was changing philosophically. Europeans, as they emerged from the Middle Ages and entered the Renaissance, were increasingly interested in the world beyond their towns or manors. This burgeoning curiosity pushed explorers to go and chart the globe. A second philosophical change also encouraged Europeans to explore.The widely accepted theory of mercantilism suggested that a country should do all it could to increase its wealth regardless of supply and demand. Since only a fixed amount of wealth existed in the world, survival depended on taking wealth from other countries and territories. The theory of mercantilism thus validated Europe’s growing colonialism.

A number of economic changes in Europe encouraged the growth of trade and helped finance explorers’ costly expeditions. First, the widespread use of standardized money made economic transactions much more reliable. Joint stock companies were formed, helping to raise money for potentially lucrative expeditions. The government also subsidized shipbuilding and other new industries. Technological changes, too, fostered the growth of global commerce. Navigational instruments such as the compass and the astrolabe, a tool used to measure latitude, made cross- oceanic voyages possible. So did improved cartography, which came about because of a Renaissance-inspired interest in Greco- Roman texts. Advances in shipbuilding allowed ships to sail against the wind, to travel quickly, and to be steered with greater accuracy.

The rudder, for example, was moved from the side to the stern, and builders discovered the value of smaller and differently shaped sails. Previously, long ships called galleys were used for European coastal trading. Galleys, however, were cumbersome to navigate, could travel only with the wind, and required large teams of rowers for power. Ship makers discovered that reducing the width of ships in proportion to their lengths made vessels more efficient. In the late 1400s, explorers began setting sail from England, Spain, Portugal, France, and the Netherlands. In 1488, Portuguese explorer Bartholomeu Dias became the first European since ancient times to round Africa’s Cape of Good Hope. Italian Christopher Columbus landed three ships on a Caribbean island in 1492. By 1497, Portuguese explorer Vasco da Gama had rounded the Cape of Good Hope and became the first to successfully travel that route to India. In 1513, Spaniard Vasco Nuñez de Balboa crossed the Isthmus of Panama and reached the Pacific. The exploration continued, with Ferdinand Magellan’s crew making the first trip around the world in 1519.

European exploration ignited fierce competition over which continental power would control the “new” lands. In fact, seventeenth and eighteenth century wars that were fought over the new colonies were often fought in the new colonies. The pace of these “discoveries” was staggering; equally so were the economic and political opportunities they created for the mother countries. While some countries focused on increasing their territories and colonizing the lands they conquered, other countries, merely traded in the lands they encountered, building up their national economies.

Maritime transport in those days was arduous and time- consuming. The earliest Portuguese voyages between Lisbon and Goa took a year and a half round trip, and carried mostly soldiers to the East. The journey included a four-month stopover at Goa or Cochin to load the return cargo: spices, indigo, hardwood, furniture, textiles, Sri Lankan cinnamon, Indonesian cloves, and Chinese silk and porcelain. The holds were filled with spices, while crates and bulky packages were, “piled so high on the decks that a man could only make his way from the poop to the prow by clambering over mounds of merchandise.” 1 Boxes, bales, and baskets were also lashed outboard to projecting planks and platforms, or were suspended over the ship’s side.While forbidden by the crown, overloading and careless stowage were regular practices.

Whether the intentions of the mother country were conquest or trade, the Age of Exploration was the catalyst for the growing mobility of goods and people around the world. For the next 450 years, European nations would draw on their colonies’ economic resources and attempt to shape them politically and culturally. European nations would intervene in almost every corner of the globe, for once the machine of global commerce had been set in motion, it would not be stopped.

The next notable period of technological transformation, for our purposes, was the Industrial Revolution. This was an era of unprecedented innovation and invention defined by the use of power-driven machinery in manufacturing and transport. During this era—the eighteenth and nineteenth centuries—Europe was transformed from a mostly rural, agricultural society into an urban, factory-based one in which machines replaced humans in many spheres of production. Industrialization soon spread to the Americas and other European colonies all over the world. The developments of the Industrial Revolution forever altered transport and created the infrastructure on which modern transport logistics has been built. Significantly, they introduced new forms of propulsion that increased the speed of travel by a factor of 100. Understanding the major transport-related aspects of the Industrial Revolution, the steam engine, the internal combustion engine, and the refrigerator, will also help us measure the success of twentieth-century transport logistics projects.

The steam engine is the father of modern transport. This device converts the potential energy that exists as pressure in steam into a mechanical force. Thomas Newcomen’s earliest steam engine (1712) pumped steam into a cylinder, where it was condensed by cold water, creating a vacuum on the inside of the cylinder. The resulting change in pressure operated a piston, creating downward strokes. James Watt’s 1769 steam engine added a separate condenser, which was connected to the cylinder by a valve. Unlike Newcomen’s steam engine, the condenser could be cool while the cylinder was hot. Watt’s engine became the dominant design for all steam engines. The steam engine was responsible for drastic changes in the standard of living around the world, laying the foundation for industrial cities and catalyzing countless inventions that could not have succeeded without its power. 2

Once the steam engine was integrated into existing transport modes such as the sailboat, it began to revolutionize the movement of people and goods that had been kick started by the Maritime Revolution and the Age of Exploration. The first steam-powered boat, developed by William Symington, sailed on England’s Forth and Clyde canal in 1802. In NewYork State, Robert Fuller’s Clermont steamship began regular service five years later on the Hudson River. The sparks shooting from its smokestack led riverbank communities to believe that this new boat was a demonic creature. The new steamship, unlike a sailboat, could not be becalmed and was not helpless in a storm. Additionally, it could arrive and depart by its own power instead of relying on an outside force. By the 1840s, steamships were regularly crossing the North Atlantic, facilitating faster inter-continental trade and travel.

Increased steam travel placed greater demands on seaports. European ports were badly in need of development after the stagnation of the Middle Ages, at which time they consisted of natural harbors with no quays or breakwaters. (Roman port construction technology—including quays made of timber, stone, brick, and concrete—was largely forgotten in the Middle Ages.) The Industrial Revolution spurred the development of new port technology, and in the nineteenth century, many companies began to develop specialized ports dedicated to certain commodities. Now that ships were traveling faster and carrying more, ports had to add warehouses, transit sheds, storage areas, cranes, grain elevators, tanks, and, later, refrigerated warehouses to speed up the cargo transit process. 3

In addition to revolutionizing ocean trade and transport, the steam engine revolutionized overland travel. The first steam- powered railway locomotive was built by Richard Trevithick in Shropshire, England, in 1802. Along with the expansion of commerce and urbanization that occurred during the Industrial Revolution came great demand for a way to move goods quickly from factory to port or city. Railways met this need and quickly spread from Great Britain to the rest of the world, facilitating the industrialization of Europe. As railways spread throughout Europe, mother countries exported the technology to their colonies, building extensive rail networks in places like India and East Africa. The demand for railways also stimulated the growth of the steel and iron industries in North America and Europe, both for the construction of locomotives and for the construction of tracks. The impact of the railways will be discussed further in Chapter 19. However, it is helpful to note here the following observation made by Yale economics professor Arthur Hadley in 1885: “Two generations ago, the expense of cartage was such that wheat had to be consumed within 200 miles of where it was grown. Today, the wheat of Dakota, the wheat of Russia, and the wheat of India come into direct competition. The supply at Odessa is an element in determining the price in Chicago.” 4 Railways drastically decreased transport costs and thus heralded the earliest stages of globalization, as we know it today.

As steam power continued to revolutionize Europe, the internal combustion engine came on the scene and provided an even more powerful energy source. In this new engine, fuel combustion took place in a small, closed container, producing expanding gases that provided mechanical power. In 1885, Gottlieb Daimler constructed what is generally recognized as the prototype of the modern gas engine. Small and fast, with a vertical cylinder, it required gasoline injected through a carburetor. Most modern gasoline engines have descended from Daimler’s prototype.

In the early 1800s, American Thomas Moore built the first refrigerator. By the 1840s, refrigerated rail cars were being used to ship perishable goods long distances. In 1875, refrigerated railway cars (box cars packed with ice) were used to ship meat from Chicago stockyards to markets on the east coast of the United States. In the same year, chilled beef made its first trans-Atlantic voyage in the refrigerated hold of a ship. In 1878, meat packer Gustavus Swift hired an engineer named Andrew Chase to develop an improved refrigerated boxcar. The implications of the freezer were great, for upper class consumers came to expect cool and preserved food to be available at their fingertips. The refrigerator also made possible the shipping and storage of perishable goods all over the world. Perishables transport has evolved far beyond a refrigerated hold on a ship or a refrigerated boxcar—today’s technology enables the rapid, reliable, global transport of fresh fruits, vegetables, meat and fish, temperature-controlled hazardous substances, pharmaceutical products, and even body parts for transplant.

Our examination of transport logistics in the twentieth century begins with a group of French investors in the late 1800s. As you explore the extensive transport logistics demands of the construction of the Panama Canal, try to imagine what it would have been like without the aid of steam-powered bulldozers, steam shovels, and railways. In Chapter 11 we will revisit the machines of global transport and measure their impact on globalization in the twentieth and twenty-first centuries.

1 Boxer, From Lisbon to Goa, 1500-1750: Studies in Portuguese Maritime Enterprise, 52.

2 Gale, An Encyclopaedia of the History of Technology, 155.

3 Pearsall, Technology in World Civilization: A Thousand Year History, 549.

4 Steele Gordon, “The Golden Spike.”

CHAPTER 5

“MAKE THE DIRT FLY”:

DIGGING THE PANAMA CANAL

“It was organization reduced to a science—the endless chain system of activity in perfect operation.” 1

Joseph Bucklin Bishop

Central transport logistics challenge: removing 213 million cubic meters of dirt (233 million cubic yards) from the Culebra Cut, the canal’s deepest channel.

The Panama Canal is one of Latin America’s greatest resources, a path between the Atlantic and Pacific Oceans that drastically reduces transit time through the region by eliminating the need to sail around Cape Horn. It is an important part of today’s patterns of global trade and transport, but the story of its construction also offers an example of remarkable success in transport logistics. The canal called for a number of engineering innovations, but we will focus specifically on the removal and transport of 213 million cubic meters (233 million cubic yards) of earth from its deepest channel, the Culebra Cut. The scope of this excavation was underestimated by both groups who attempted it, but the latter group was successful because of proper planning, clear lines of communication, visibility over the entire project, and the strategic use of rail transport. The Industrial Revolution of the nineteenth century produced many new developments in machinery, communications, and transport. For the first time, the industrialized nations of the Western world needed a fast, inexpensive way to ship raw materials and finished goods overseas to distant markets. The answer to this need, and indeed to their larger need for commercial expansion, was inter-oceanic travel. In 1881, the French Universal Inter- oceanic Canal Company began digging the Panama Canal. Engineer Ferdinand de Lesseps, who had played a major role in the construction of the Suez Canal in the 1850s and 1860s, headed the project. After spending every cent that had been invested, the Company ceased work in 1898. Their failure was due to a number of factors, one of them being de Lesseps’s determination to build the canal at sea level, which required much more excavation than was needed for a lock-system canal.

A number of external technical factors also contributed to de Lesseps’s failure: poor planning; a lack of knowledge of the causes of yellow fever and malaria (which killed as many as 22,000 people); inadequate attention paid to housing and feeding a large work- force (which could not have been supported by the small national economy at the time); financial mismanagement and bribery; misinformation communicated to the public and to financiers; and an inability to combat Panama’s environmental threats (poisonous snakes, pumas, jaguars, and insects).

De Lesseps was a naïve and inept manager. He was consumed with his own vision for the Canal, and he refused to heed the advice of experienced engineers. And yet he had an uncanny ability to gain people’s loyalty and affection, causing them to act against their better judgment even when they saw the project failing. 2 Perhaps this is why the French fiasco was able to stagger on for so many years. Though he led them in a disastrous direction, de Lesseps was a dynamic leader who used his magnetic persona to mobilize his people.

Despite spending all of the $262 million that had been invested in the Panama Canal, the Universal Inter-oceanic Canal Company was able to complete less than a quarter of the construction. It turned out to be more difficult to remove rocks from the floor of a jungle than it had been to remove sand from the flat, desert area that became the Suez Canal. However, the French did leave behind some resources that were useful for the next group of builders: hospitals, offices, storehouses, dock facilities, living quarters, machine workshops, maps, plans, surveys, and hydrographic data. What is more, they provided a head start on the excavation by removing 50 million cubic meters (54 million cubic yards) of earth and rock. According to historian David McCullough, without de Lesseps’s visionary, if tragic, start, the Panama Canal would not have been built. 3

France was not the only nation that recognized the strategic importance of connecting the Pacific Ocean with the Atlantic. The United States had been interested in an inter-oceanic canal in Central America since President Ulysses S. Grant ordered the Navy to conduct geographic surveys of possible routes in 1869. As de Lesseps’s work came to a grinding halt, the United States took a renewed interest in his unfinished ditch. To President Theodore Roosevelt, the canal was essential for US domination of the Atlantic and Pacific Oceans. Specifically, the Spanish-American War of 1898 had convinced him that the United States needed a canal for its national security interests. During that war, it took the battleship USS Oregon over two months to travel from the west coast of the United States to the Caribbean, due to the dangerous, 19,308- kilometer (12,000-mile) trip around the tip of South America. If the Panama Canal had been open at the time, the Oregon would have had to sail only about 6,400 kilometers (4,000 miles). In 1902, the United States decided to take steps toward gaining control of the Panama Canal Zone, which was then under Colombia’s jurisdiction. It offered Colombia a treaty by which the United States would purchase the assets of the French company that had gone bankrupt in 1898, and Colombia would in turn grant them control of the Canal Zone. The United States would pay Colombia $10 million in gold, plus an annual rent of $250,000. However, Colombia rejected the offer, so with the support of the United States, Panama gained its independence from Colombia in a brief revolution. Panama then agreed to sign the Hay-Bunau-Varilla Treaty of 1903, which ceded a 16-kilometer (10-mile) wide strip of land to the United States. Under the conditions of this treaty, the United States had the right to build, operate, and defend the canal. It also had to pay Panama $10 million, plus an annual fee of $250,000. Finally, Panama’s powerful northern neighbor had the right to continue work on the canal.

The project’s first chief engineer was John Findlay Wallace, who quit after one year on the job. Then engineer John F. Stevens was appointed in 1905, after completing several railway projects in the western United States. Building upon what the French had accomplished, the Americans set to work after three years of planning and preparation. When Stevens arrived in Panama he found poor infrastructure, primitive living conditions, a lack of food, and perhaps most dangerous of all, yellow fever and malaria. These diseases had been a problem for the French and were still rampant in Panama. US Army doctor William C. Gorgas had eradicated yellow fever in Havana in 1901, so he was put in charge of doing the same in Panama. Through medication, mosquito nets, and the drainage of all standing water, Gorgas and Stevens quickly and successfully eliminated the illnesses that had crippled the French effort.

Once the health crisis was under control, Stevens took other important steps to improve the support infrastructure and prepare the Canal Zone for the thousands of workers who were on their way: he built housing and hospitals, paved the roads, created a sewage system, installed telephone lines, developed ports, and imported refrigerators to ensure a fresh food supply. He also brought in heavy excavating equipment and laid a double-track railway across the isthmus to accommodate freight and laborer transport. This railway would eventually be synchronized with the operation of 80 new 4.5-cubic meter (five-cubic yard) capacity Bucyrus-Erie steam shovels that excavated up to 219,455 cubic meters (239,999 cubic yards) of spoil each month. When Stevens resigned in 1907, he was replaced by US Army engineer Col. George Washington Goethals, who had more experience in canal, lock, and dam construction. However, Stevens’s expertise in railway construction laid a foundation that would later prove to be essential to the success of the project, especially the Culebra Cut.

For many years engineers had debated the type of canal that would best suit the Isthmus of Panama: should it be dug through the isthmus at sea level, or should they create a series of locks to carry ships between the Atlantic and Pacific Oceans? Digging the canal at sea level, which de Lesseps had attempted, would require much more excavation. It would be a deep, narrow, impractical, and expensive choice, for the canal would have to hold all the drainage from the flood-prone Chagres River, which crossed the canal route at several points. Alternatively, a lock system canal had been proposed by French engineer Godin de Lepinay 30 years earlier. He proposed damming the Chagres River to form an artificial lake. Ships entering the canal from the Atlantic Ocean would rise through a series of locks to this lake, and after crossing it, pass through a channel called the Culebra Cut that would take them across the continental divide. Ships would then descend through another set of locks to the Pacific Ocean.

Stevens chose the lock-system canal and proposed building an earth dam at Gatun to harness the river’s floodwaters. This would reduce the excavation needed at the Culebra Cut, and the resulting lake would provide the water and hydroelectric power needed to operate the canal locks. A third benefit would be that the lake would cover one third of the Isthmus and become a water bridge for passing vessels. “It will provide a safer and quicker passage for ships,” Stevens said. “It will provide, beyond question, the best solution to the vital problem of how safely to care for the floodwaters of the Chagres…. Its cost of operation, maintenance and fixed charges will be much less than any sea-level canal.” 4 The US Congress approved Stevens’s proposal. With the creation of his dam, the Gatun Lake was born, submerging 263 square kilometers (164 square miles) of jungle, villages, and railway tracks.

The most logistically demanding section of the canal was the Culebra Cut (later called the Gaillard Cut), a 14-kilometer (nine- mile) stretch of deep excavation that attracted more tourists than any other location along the widening canal. Every day, 300 rock drills, steam shovels, trains, and blasting crews cut into the earth at Culebra, slowly making the passage wider and deeper. So many machines were necessary because to conquer this section of the canal, workers had to literally cut through a mountain range. Trains brought in 6,000 laborers six days a week, where they worked a nine to ten-hour day. At night, repair crews came to fix damaged equipment.

The average depth of the Culebra Cut is 35 meters (120 feet), and its width reaches one-third of a mile. Constructing the canal required a total of 27 million kilograms (61 million pounds) of dynamite, and one half of the labor force at the Cut was employed in dynamite blasting. So much dynamite required careful transport logistics: shipments of 1 million pounds arrived at Colón in the form of 20,000 fifty-pound boxes, which were unloaded by hand, placed on trains, and transported to isolated concrete warehouses. 5 As the cut got deeper, workers found less soft earth and more rock, which called for air-driven rock drills to bore holes for the placement of dynamite charges. The aggregate depth of these dynamite holes was more than 104 kilometers (65 miles). 6 After the rock was blasted away, steam shovels completed the excavation of the earth. During the month of March 1909, the Americans reached their peak: 68 steam shovels removed 1.8 million cubic meters (2 million cubic yards) of earth and rock, which was 10 times the volume the French had achieved in their best month. 7 At this peak there was a train moving in or out of the Cut nearly every minute of the workday. 8

Rail transport played an important role in work at the Cut, as the 213 million cubic meters (233 million cubic yards) of earth would ultimately have to be removed and deposited somewhere else. This required careful planning and the organization of thousands of laborers.When Goethals took over in 1907, he divided the Cut into three sections with a head engineer supervising each one. No one sphere of the project could interfere with or halt another, therefore all of these complicated operations had to be carefully synchronized. Observer Joseph Bucklin Bishop later described the setup: “All shovels, every mile of track, every one of the hundreds of rock drills in use, were located on a map at division headquarters. … Careful estimates were made as to the progress of each individual steam shovel, when it would have to be repositioned, when tracks would have to be shifted, what effect such moves would have on the disposition of drilling and blasting crews. So neatly was everything coordinated, so smooth were communications, that at the close of each day locomotive crews, as an example, had only to check the assignment boards at the roundhouses to see exactly what they were to do the day following.” 9

In 1904, as work on the canal was just beginning, Roosevelt famously boasted that he would, “make the dirt fly.” 10 While dirt did not actually fly out of the cut, its transport was remarkable nonetheless. Stevens used his expertise in railway planning to vastly improve rail service to the Culebra excavation sites. In order to expedite dirt removal, seven parallel railway tracks were laid to support the 160 trains that came in and out every day. (Because of the rain and mud, motor trucks would not have worked nearly as well.) This railway system functioned like a conveyor belt, with rail-mounted steam shovels scooping up the excavated earth and rock and dumping it into the nearby railway cars that would then carry it directly to dump sites. The tracks had to be relocated as workers made progress on the Cut, because as they dug deeper the bottom contracted in width and their working area narrowed. In one year, over 1,000 miles of track were shifted.

Main towers at the Cut’s two entrances directed traffic, and these towers were connected to the dumps and smaller traffic control towers by telephone. Dirt was dumped in 60 different locations, each controlled by a yardmaster who oversaw the distribution of the unwanted earth and rock and who reported to the traffic control towers exactly how much space he had for spoil. In this way, head engineers could monitor the project’s progress using the real time communication of the early twentieth century: telephones. Two valuable new inventions came into play in the dumps. The dirt spreader mechanically flattened loads dumped by incoming trains, doing the work of 5,000 to 6,000 men working by hand. 11 The track shifter picked up entire sections of railway tracks at one time, rails and all, and swung them to new locations as far as two meters (nine feet) away. Of all the heavy equipment used by the Americans (steam shovels, unloaders, dirt spreaders, and track shifters), only the steam shovel had been used by the French. Work on the Culebra Cut was not without grave obstacles: thousands of men were killed or injured by stray explosives and other accidents, and engineers faced numerous landslides that killed workers and buried equipment, destroying valuable railway tracks and many days worth of hard work. Despite these challenges, the Americans finished the Culebra Cut and opened the canal in August 1914, under budget and ahead of schedule, at a total cost of $352 million. By July 1, 1914, a total of 245 million cubic meters (268 million cubic yards) had been removed from the canal by the French and Americans. 12 Thirty-three grueling years after the French broke ground, the innovators of the Panama Canal had created one of the wonders of the modern world.

Summary

In 1999, the United States returned the Canal Zone to Panamanian sovereignty. Since its construction, the Canal has played a major role in world trade, and in 2004 recorded a total of 14,035 transits. A vessel traveling from the East Coast of the United States to Japan saves about 4,837 kilometers (3,000 miles), and a vessel traveling from Ecuador to Europe saves 8,045 kilometers (5,000 miles). The Canal has facilitated global transport, spurred growth in developing countries, and been a force in economic expansion in many remote parts of the world.

What was the key to the Americans’ success? It was much more than simply the strategic use of trains. First, they spent an adequate amount of time planning, strategizing, and coordinating before they began operations. This included extensive infrastructure development to ensure that the Canal Zone could accommodate a large work force and that the railway network was sufficient to carry in supplies, laborers, and heavy machinery, and to carry out spoil. Goethals remarked, “Stevens devised, designed, and made provision for practically every contingency connected with the construction and subsequent operation of the stupendous project… It is therefore to him, much more than to me, that justly belongs the honor of being the actual ‘Genius of the Panama Canal.’” 13 Without Stevens coordinating the transport logistics for spoil removal, the project probably would not have seen such success.

Second, head engineers and logisticians maintained visibility over the entire Culebra excavation project using real time communication.The organization of earth removal was so exact that it was described by an observer as “a science”—a testimony to the clear systems of communication practiced by project managers. Third, the engineers utilized technology that kept them flexible and adaptable, namely the railway track shifter. In this way, they could alter operations on the ground as they made progress in the Cut or encountered unexpected obstacles such as landslides. In the late 1980s, work began on the Channel Tunnel connecting England and France.This project involved a total excavation volume of about 7.75 million cubic meters (8.5 million cubic yards) of spoil and utilized the most advanced excavation equipment of the late twentieth century. 14 Yet, the Panama Canal required over 30 times as much excavation, at a time when excavating techniques were still in a developmental stage. The Panama project involved great risk and challenging technical and logistical problems, which were solved with principles like planning, visibility, and flexibility.

1 McCullough, The Path Between the Seas: The Creation of the Panama Canal 1870-1914, 543.

2 Ibid., 237.

3 Ibid., 239-240.

4 Ibid., 486.

5 Ibid., 545.

6 Ibid., 545.

7 Ibid., 546.

8 “The Panama Canal…a Dream of Centuries,” 3.

9 McCullough, The Path Between the Seas: The Creation of the Panama Canal 1870-1914, 547.

10 Ibid., 408.

11 Panama Canal Authority Technical Resources Center and Corporate Communications Division. “A History of the Panama Canal: French and American Construction Efforts”

12 Panama Canal Authority Technical Resources Center and Corporate Communications Division. “A History of the Panama Canal: End of the Construction.”

13 Panama Canal Authority Technical Resources Center and Corporate Communications Division.

14 Anderson, The Channel Tunnel Story, 58.

CHAPTER 6

SUCCESS AND FAILURE IN THE SKY

The German Airlift at Stalingrad

“Famine makes greater Havoc in an Army than the Enemy, and is more terrible than the Sword. Time and Opportunity may help to retrieve other Misfortunes; but where Forage and Provisions have not been carefully provided, the Evil is without Remedy.” 1

Flavius Vegetius Renatus

Central transport logistics challenge: airli ing 700 tons of food, fuel, ammunition, and equipment per day to 280,000 men encircled by the enemy, with the added challenges of inclement winter weather and enemy fire.

The Battle of Stalingrad during World War II has the distinction of being one of history’s most infamous and brutal military defeats. The combination of a harsh Russian winter, Soviet military superiority, brutal urban combat, and a failed airlift left the Germans with no choice but to surrender after they had pushed their way deep into the steppe. It was a decisive battle in the war, and logistics failure featured prominently—specifically, the failure of the German Air Force (Luftwaffe) to supply German troops with food, fuel, ammunition, and equipment.

Against the advice of his generals, Adolf Hitler attacked the Russian city of Stalingrad in the summer of 1942. At the same time, his army advanced toward the oilfields of the Caucasus. With complete control of the region, Hitler could deprive the Russians of their oil supply and use it to feed his own war machine. The objective of German operations was the economic resources needed to support their military production. 2

However, Stalingrad was the farthest east that the Germans were able to push. To conquer both the Caucasus and Stalingrad would prove impossible. By November 1942, General Friedrich von Paulus and the Sixth Army were located in Stalingrad west of the Volga River. Von Paulus and General Maximilian von Weichs of Army Group B both suggested to Hitler that the Sixth Army pull out of Stalingrad and relocate to a position 160 kilometers (100 miles) south, before the Soviet army had a chance to encircle them. Hitler immediately wrote back ordering von Paulus to remain in Stalingrad, implying that an air supply to the Sixth Army would begin soon. In a matter of days, the Russians had indeed encircled the 280,000 men of the Sixth Army, creating a 160-square kilometer (100-square mile) German pocket that would later be known as the Cauldron. Hitler’s advisors suggested a breakout, but his public credibility depended on holding Stalingrad and the Volga Valley as he had vowed to do; to lose them would mean humiliation. His stubbornness and inflexibility denied von Paulus any freedom of action. Hitler reiterated his promise to supply the Sixth Army by air.The mission, if undertaken, would be the largest airlift operation to date.

The days leading up to the final order to proceed with the airlift were tense and riddled with misinformation, miscommunication, and mistakes. Initially, Luftwaffe Chief of Staff General Hans Jeschonnek told Hitler that the airlift could be accomplished if transport planes and bombers were used, and if there were adequate airfields available inside and outside the pocket. Jeschonnek was under the impression that the encirclement was only temporary, and that the Sixth Army would soon break out. Jeschonnek also recalled that, earlier in 1942, the German Eighteenth Army had been successfully supplied by air while encircled in the Demyansk pocket. 3 This bolstered his optimism concerning the prospective Stalingrad airlift. However, during the Demyansk airlift, there had been much less snow, ice, and fog than the Germans would find at Stalingrad. In addition, only 100,000 men had been involved, fewer than at Stalingrad. Disregarding these considerations, Jeschonnek made a rash recommendation to Hitler without first consulting air transport experts and commanders in the field, or doing any calculations of Luftwaffe capacity. To his credit, he later admitted his mistake and tried to persuade Hitler to rethink his options. However, Jeschonnek’s attempts to make right were snuffed out by Hermann Göring, commander in chief of the air force and Hitler’s second-in-command, who warned him not to oppose Hitler’s airlift plans. 4 Göring knew that Jeschonnek’s affirmative answer had been based on misinformation and false premises, but he deliberately kept this from Hitler. Göring, therefore, bears as much responsibility for this disaster as Jeschonnek, if not more. When Hitler first asked Göring whether the Luftwaffe could meet the logistical needs of the Sixth Army, as Jeschonnek had promised they could, he too gave a premature affirmative answer. Göring, like Jeschonnek, should have first consulted the relevant parties, studied all available information, and asked the opinion of General Wolfram von Richthofen, who was responsible for supplying von Paulus. Göring failed to do this, not only when making his first assurances, but also when making his final promises. 5 He visited Hitler on November 22 to discuss the situation, at which time he continued to affirm the feasibility of the airlift. He soon disappeared to Paris for a shopping trip, though the operation surely needed his organization and oversight. When he returned from Paris, he was only marginally involved in the airlift operations. 6

By the time Jeschonnek was ready to tell Hitler that he had been wrong about the feasibility of the airlift, it was too late: Hitler’s convictions had solidified because of unanimous support from those around him, especially Göring. The blame for the decision ultimately rests on Hitler, Göring, and Jeschonnek, though Hitler’s responsibility outweighed the others. 7

Finally, in late November, against the advice of Jeschonnek, Army Chief of Staff Kurt Zeitzler, and the commanders on the front, Hitler gave the order for the Sixth Army to be supplied by air. John Millett writes that during World War II, “all the great conferences of military leaders throughout the war determined military strategy in the light of transport possibilities.” 8 However, at Stalingrad this clearly was not the case. The German leaders made major supply decisions without properly calculating capacity, examining weather forecasts, or considering the strength of Soviet anti-aircraft weapons.

The Sixth Army of 280,000 men required seven hundred tons * of food, fuel, ammunition, and equipment per day. Jeschonnek knew that the Luftwaffe had the capacity to lift only 200 tons * per day, but the overconfident Göring, acting against Jeschonnek’s advice, predicted that they could deliver 500 tons. During the previous winter the Germans had discovered that only 50 percent of their aircraft could be operational at any given time, so delivering 500 tons * per day required 1,000 aircraft with a capacity of one ton each. The available transport force consisted of 500 bombers, 350 fighters, 100 reconnaissance planes, a few transport planes, and some other warplanes. 9 It was clear from the beginning that these planes were not enough. Von Richthofen also disagreed with the plan and urged Hitler to reconsider, but against his better judgment, he was forced to comply with orders.

Göring’s 500-tons-per-day prediction did not take into account harsh Russian winters, which would cripple transport. In addition to the problem of snow and ice, Luftwaffe generals had allocated unsuitable aircraft for the job—mere pilot-training planes gathered from German operations centers all over Europe. Many, such as the Junker 52s, were non-winterized and fresh from operations in North Africa. 10 As a result, during the operation, the oil and hydraulic fluids congealed, rendering struts and other mechanisms inoperable.

Neither did Göring’s calculation include the possibility of aircraft being captured by the enemy. Eventually the Russians captured most of the departure airfields within the Cauldron, along with the aircraft, personnel, and equipment located there. German holdings within the Cauldron were shrinking rapidly and incoming German pilots were flying over an ever-widening stretch of enemy territory before they reached their landing strips.

As we shall see, in the post-war Berlin Airlift, American and British pilots faced little resistance from Soviet fighter planes, making their task substantially easier. But at Stalingrad, the Germans dealt with a constant barrage: the Soviet air force’s main strategy was to eliminate the German supply by destroying Luftwaffe planes before they even got onto the ground. Fourth century military writer Flavius Vegetius Renatus said that the principal point of war is to secure provisions and to destroy the enemy by famine. 11 The Soviets were skilled in doing just that: by December, 30 percent of all German flights to Stalingrad—carrying the food that kept German soldiers from starving—either crashed or were shot down before they got there. 12

There were six airfields within the pocket, but it was difficult to maintain them all. Only the Pitomnik airfield was equipped to handle large-scale operations and to operate 24 hours a day. The others lacked even the most basic communications and air traffic control equipment, as well as equipment for off-loading aircraft and moving supplies quickly—all of this had to be done by hand, dealing a serious blow to efficiency. Other infrastructure support facilities were missing as well. The only supply depot was located at Tatsinskaya, a small village from whose airfields Luftwaffe planes took off to fly to the Cauldron.Tatsinskaya was sustained by a single small-gauge rail line, which was eventually captured by the Soviets. Road transport was out of the question due to winter weather conditions and a lack of trucks and fuel.

The scene at the airfields was particularly horrific. While the wounded lay by the runway waiting for evacuation, Soviet attacks wiped out the planes that attempted to land with supplies or take off loaded with evacuees. Pilots were forced to land on icy runways and then dig their planes out of snow banks when it was time to take off; in fact, an airfield constructed at Zverevo was simply a runway of packed snow. Wrecked aircraft littered the Pitomnik airfield, making the runways an obstacle course for incoming pilots. The ground crews had no warm accommodations, and some froze to death in their tents and igloos. Rations were cut to one third, and combat units had so little food that they resorted to eating mice, dogs and horses. 13 In addition, many of the crews brought in from Africa had nothing to wear but summer uniforms, which offered scant protection from winter on the steppe. The airlift was so hurried and disorganized that often the wrong supplies were brought, such as huge shipments of spices, or right shoes without left shoes to match. 14 The ground was too hard to dig graves, and piles of frozen corpses lay all over the fields.

Von Richthofen told Jeschonnek on December 12 that his trust in the German leadership had “rapidly sunk below zero.” One week later, von Richthofen heard that Göring had told Hitler that the supply situation in Stalingrad was “not so bad.” “I can only assume that my reports either are not read or are given no credence,” von Richthofen then wrote in disbelief. 15 He was correct in his assumption, for Göring made sure that Hitler remained largely uninformed about the actual events at Stalingrad. No matter what updates were given in von Paulus’s and von Richthofen’s memos, Hitler maintained that he would not leave the Volga. 16 It was his goal to make the soldiers at Stalingrad into a heroic example for the German people. Meanwhile, rations in the Cauldron were cut further and soldiers started dying of starvation.

On January 25, the Gumrak airfield was lost to the Soviets, completely isolating the Sixth Army and requiring that further supplies be airdropped. There were now more than 20,000 wounded men in the Cauldron. 17 On January 31, 1943, against Hitler’s orders, von Paulus and what was left of the Sixth Army surrendered to the Russians.The Luftwaffe, whose average delivered tonnage had turned out to be less than 100 tons per day, had failed miserably. 18 Later in 1943, Jeschonnek committed suicide. By the time the last German POWs returned home from Russia in 1955, an army of 280,000 had been reduced to only 5,000 survivors. 19

The Berlin Airlift: Transport Logistics as a Tool of Foreign Policy

“Sir, the Air Force can deliver anything.” 20

Lieutenant General Curtis LeMay

United States Air Force

commander in Western Europe

Central transport logistics challenge: airlifting upwards of 3,475 tons of food, coal, raw materials, liquid fuel, and other basic necessities every day to supply a city of 2 million.

Three years after World War II ended, Germany remained a divided country with the city of Berlin deep inside Soviet-controlled East Germany. Berlin itself was divided in two: the East, controlled by the Soviet Union, and the West, controlled by the Allied powers of France, Britain, and the United States. It was agreed that the Allies would have access to their side of the city by military traffic and three air corridors over East Germany.

In March 1948, the Allies joined the West German sectors, including West Berlin, into a single economic unit where they soon initiated currency reform. Fearing a united West Berlin, the Soviets decided in June that this reform was unacceptable. On June 25, they halted all land, river, and rail traffic from West Germany into Berlin, planning to deny West Berliners the food and fuel they had been receiving from the Allies. The Allies thought these actions dangerous, assuming that if West Berlin fell to the Soviets, all of Europe could fall to the Soviets.

BERLIN AIRLIFT

The Allies were now confronted with the problem of supplying West Berlin with food and fuel, lest it weaken and fall to the Soviets. General Lucius Clay, the highest-ranking American officer in West Germany, responded by proposing a military invasion of East Germany in order to take supplies to Berlin. The Joint Chiefs of Staff, however, recognized that this could potentially trigger a third world war and rejected his proposal.

Despite the blockade on the ground, three 32-kilometer (20- mile) wide air corridors remained open, connecting West Berlin with Frankfurt/Main, Hamburg and Hannover-Bueckeburg in West Germany. The Joint Chiefs asked Lieutenant General Curtis LeMay, US Air Force commander in Western Europe, if it would be possible to airlift food and coal to Berlin. Never before had an entire city been supplied by air, but LeMay was undaunted: “Sir, the Air Force can deliver anything,” he replied. 21

The nature of the Berlin crisis meant that the Allies did not have the luxury of time to plan the airlift before it began on June 26, 1948; the Soviet blockade had gone into effect only a few days earlier. Instead, Allied planning was an ongoing process of reevaluation and streamlining, resulting in major improvements and increased tonnage as the airlift progressed.

The Allied occupation force in West Berlin initially calculated that the city would need 3,475 tons of food, coal, raw materials, liquid fuel, and other necessities every day to supply its two million inhabitants. 22 This figure would later be revised as the weather turned colder and coal needs increased. It was clear, however, that the Air Force’s war-weary Douglas C-47s, capable of hauling three tons each, were not enough for the job. Four Douglas C- 54s, capable of carrying 10 tons each, were ordered to report to Wiesbaden and Frankfurt, two large Allied bases in West Germany close to the East German border. The Douglas C-54 Skymaster had been designed as a passenger plane for long-distance flights, but was to be used in the Airlift for heavy cargo traveling short distances. In the slow beginnings of the Berlin Airlift, 2,000 tons per day were airlifted into West Berlin. Tonnage requirements were later revised upward to 5,620 tons per day, which, using C-54s, translated into one landing every 7.6 minutes at each airfield in Berlin. 23 A careful route selection process guided the transport of food and coal from all over the world into West Berlin. Supplies from the United States came to Bremerhaven, Germany, by ship. They were then sent by rail to West German depots, where three days worth were warehoused. Supplies from locations in Europe were transported to the depots by train or barge, and then loaded onto ten-ton trucks at the railhead. Cargo was loaded exactly the way it would later be placed on the aircraft, and then driven onto the airfields. All of the ground transport operations were supervised by the US Army, which developed a coordinated rail and truck system through trial and error. 24

Allied planes took off from one of nine air bases in West Germany, flew 274 kilometers (170 miles) into Tempelhof or Gatow in West Berlin via the northern and southern air corridors, and then exited by the center corridor. This presented a challenge, as planners had to carefully channel a high volume of air traffic from nine air bases in West Germany to only three airfields in Berlin, and through a tight corridor at that. It was a four-hour round trip flight to Berlin, during which the Americans flew at 1,500-3,000 meters (5,000- 10,000 feet) and the British at under 1,371 meters (4,500 feet) to avoid mid-air collisions. As the airlift progressed, corridor flight patterns were revised based on weather forecasts.

By the time the planes arrived in Berlin, empty trucks were waiting on the runways to be filled up. Within six to 10 minutes, 12-man teams could off-load each plane’s 180 to 200 bags. 25 (Not every flight carried that many bags, as bags of coal weighed up to 45 kilograms [100 pounds] each, and planners had earlier decided to limit the C-54s to 10-ton loads in order to reduce wear on the engines.) Once the trucks were full, they were weighed (in the case of coal), and then they transported the cargo to depots where it was loaded onto rail cars for distribution in West Berlin. Gradually more C-54s were added to the fleet. By September, the C-47s were phased out and 225 C-54s were at work. Tonnage figures rose, and a third airfield was constructed at Tegel in the French sector of West Berlin. General William H. Tunner, a US Air Force general who during World War II had led transport operations across the Himalayas from India to China, was called on to command the United States and Britain’s Combined Airlift Task Force. He was intent on increasing the efficiency of the operation and the tonnage entering West Berlin. This was achieved in several ways. Under Tunner’s direction, the deteriorating runways at Tempelhof were refurbished and expanded. He also obtained the use of two more West German bases at Celle and Fassberg. Tunner’s goal was to streamline the Airlift’s operation, he said, to the extent that, “the pilot would take off and head for Berlin at a speed and heading so precise that he might as well be on a conveyor belt.” 26 One of Tunner’s most formidable challenges was keeping his pilots from wasting time on the ground in West Berlin. “What I found was badly needed was better timing of the flying operation,” Tunner wrote in 1969. “Valuable time was wasted in Berlin as crews landed, parked, shut off engines, took off for the snack bar and then strolled over to Operations to make out their return clearances.” 27 Therefore, he ordered that no crewmember was to leave his plane while it was being unloaded in Berlin. Instead, each plane was met by an operations officer who handed the pilot his return clearance. A weather officer would give him the latest weather back at his home base, and the necessary trucks came out to the plane to service it. These improved ground operations even featured mobile snack bars staffed by “attractive Berlin women.” 28 The result was that pilots spent less than 30 minutes on the ground in Berlin, instead of an hour. Back at the bases in West Germany there was a one hour and 40-minute turnaround time for ground crews to refuel, reload, do preflight preparations, and perform maintenance.

Tunner also used the continuous flow method to standardize speeds of climb, cruise, and descent for the flights. Takeoffs were synchronized to the exact second, with only a three-minute interval between each one. With 1,440 minutes in a day, they could achieve 480 landings daily, which insured that the Airlift as a whole followed a steady and efficient rhythm. On April 16, 1949, at the height of the airlift, planes took off and landed every 90 seconds. The continuous flow method demands a proper support infrastructure and that planners minimize the effects of adverse weather. 29 This support infrastructure included bases, a supply system, aircraft maintenance, and air traffic control.

The airlift saw the implementation of other aviation innovations, too. At all times, pilots flew by instruments, rather than by visual flight rules. Tunner also made a rule that pilots return to their home bases if they failed their landing attempt. This prevented dangerous pile-ups of incoming planes in the skies above the bases. Strict punishments were imposed on pilots who risked landing in bad conditions, or who landed on a second or third attempt. The Berlin Airlift placed great demands on pilots, sometimes requiring them to fly as much as 160 hours per month. 30 In addition to bad weather and the treacherous north German fog, they had to contend with harassment by Soviet fighter planes. In 733 recorded incidents of harassment, the Soviets used ground-to-air and air- to-air fire, radio interference, flares, ground explosions, and chemicals, flak, and strong searchlights aimed at the cockpits. 31 Much of the food brought into Berlin was dehydrated to reduce its weight and volume. Dehydrated potatoes were a favorite, because they constituted 40 percent of their original weight and required less space on board. Other vegetables and fruit were also dehydrated. In this way, the weight of an average daily ration could be reduced to 600 grams. Since weight was an important factor, loading experts carefully married loads, mixing heavy solids with lighter and bulkier cargo to maximize available space.

On Easter Sunday, 1949, all previous tonnage records were broken. In one day pilots carried 12,941 tons in 1,383 flights (almost one flight per minute). 32 This demonstrated the airlift’s load capacity, as well as the ability to handle an unprecedented density of air traffic: at three West Berlin airports, located within less than a 32-kilometer (20-mile) radius, there were 2,800 incoming and outgoing flights. Ground Controlled Approach (GCA) is an aircraft control mode in which aircraft are talked down for landing with the use of surveillance and precision approach radar.Without the use of GCA, which was developed by the US Air Force, it would not have been possible to coordinate such dense air traffic. According to US Air Force historian Roger Miller, the use of GCA was probably the most important technical factor in the airlift’s success. 33

By January 1949, it seemed that the air bridge had been a success. On May 12, the Soviet Union lifted the blockade and re-opened road, rail, and river traffic from West Germany to West Berlin. The airlift continued until September 30, bringing in enough provisions to last another year. Since the airlift proved the blockade ineffective, the Soviets officially divided the city and set up a separate East Berlin municipal government in November 1948. Eventually they divided the city by means of the Berlin Wall, which stood from 1961 to 1989.

According to the US Air Force, the entire airlift boasted 277,569 flights carrying a total of 2.3 million tons of cargo to Berlin. 34 In addition to the cargo flown into the city the Combined Airlift Task Force transported 81,730 tons out of Berlin. 35 It had cost $233,887,624, as well as the lives of 79 Americans, Britons, and Germans. 36

The Berlin Airlift is remembered as a groundbreaking accomplishment in aviation. It proved the feasibility of 24-hour air cargo transport while validating the use of air freighters and specialized transport planes by the armed forces. GCA was greatly improved, and today’s air traffic control system has developed from that technology. Cargo loading procedures also evolved because of the airlift. Finally, new aircraft specifically created for air cargo operations were developed based on the C-47s and C-54s of the Airlift: the Lockheed C-130 Hercules (1955), the Lockheed C-141 Starlifter (1963), the Lockheed C-5 Galaxy (1968), and the Boeing C-17 Globemaster III (1995). 37

In 1949, the Cold War was in its earliest stages. Over the next 40 years, it would be fought not with actual weapons, but largely with ideas and with threats. It is therefore fitting that the Cold War had its beginnings in a nonviolent logistics showdown, instead of in armed conflict that could have cost thousands of lives. The remarkably precise, well-planned logistics operations of the Berlin Airlift helped two superpowers avoid major conflict.

Summary

Planning, resource allocation, readiness, flexibility, communication, and visibility: these logistics principles were critical to the outcomes of the Berlin and Stalingrad airlifts. Uncontrollable weather aside, they were the factors that made the difference between miserable failure and unprecedented success. The outcome of the airlifts also depended on the ability to increase airlift capability, improve infrastructure, and minimize the impact of inclement weather.

Planning

Allied planning was evolutionary in nature. The Allies had little time before the airlift started, but they were able to successfully assess and revise their practices as it progressed. The tonnage requirements that were originally forecast were revised as the weather got colder and more coal was needed. General Tunner carefully planned flight timings, speeds, and flight patterns, standardizing them across the operation. He improved operations even though the airlift was well underway when he assumed his post, and was clearly the “mover and shaker” responsible for its success. Proper planning was almost completely absent from the Stalingrad Airlift—a fact tragically exemplified in the allocation of non-winterized planes and the deployment of soldiers wearing nothing more than summer uniforms.

Allocation of Resources

Though initially the Allies lacked sufficient aircraft for the airlift, they allocated the necessary planes as demand increased. American aerospace companies churned out faster, larger, and more efficient cargo airplanes, some of which went straight to work in the skies over East Germany.The Germans, however, started their operation without sufficient winterized planes and without the capacity to supply or produce more, due to other commitments in North Africa. Nor could Germany produce enough unloading equipment to properly outfit the Stalingrad airfields.

Flexibility, Readiness, and the Ability to Overcome Unexpected Challenges

Allied leaders were able to evaluate and reform their operating procedures as the Berlin Airlift progressed, adding new airfields, reducing turnaround time, lighting airfields, and changing flight patterns to create a seamless operation. In contrast, the Germans did not have the resources to make changes in any of their operating procedures. Instead of adding airfields, their airfields quickly disappeared. Instead of adding bigger, better aircraft, their already short supply was rapidly lost to the enemy. The Germans’ inability to upgrade their infrastructure severely hurt the airlift and contributed to the collapse of the Sixth Army. 38 In short, the Allied operation was characterized by flexibility and the readiness to meet unexpected challenges, while the German operation was not.

Visibility of Operations

The Allies centralized information so that the various segments of the operation were completely visible. A Master Control Weather Station at Frankfurt (with a sub-station at Tempelhof) was developed by the AirWeather Service to pool resources from various weather stations, centralize data, and provide the most accurate forecast possible. With this forecasting technology and adverse weather planning (plus standard operating procedures and proper navigation/approach technology), the Allies were able to minimize the impact of inclement weather, which was probably their single greatest threat. Because officials could obtain accurate forecasts, as well as get immediate updates on all aspects of the operation, they maintained complete visibility over the airlift’s progress. Communication in the Stalingrad Airlift was just the opposite: Göring kept Hitler uninformed as the airlift progressed, despite reports from generals of the dire situation in the Cauldron.

Communication in the Planning Stages

The Berlin Airlift was controlled by officials who maintained clear lines of communication and shared information. Operations officially began only once the top leadership had their generals’ assurance that the necessary tonnage could be airlifted. The Stalingrad operation, on the other hand, was clouded with secrets and misinformation from the start and was characterized by an utter lack of communication and information sharing. Top generals misinformed Hitler, and then deliberately kept certain news from him when they knew it would be unfavorable.

The Berlin and Stalingrad airlifts make it clear that airlift operations in support of large numbers of people can only be accomplished after careful planning and preparation, and only by an air force that has all necessary means of transport at its disposal. 39 Whether the German Sixth Army could have survived, even with a successful airlift, is debatable. In addition, many of the problems with the Stalingrad airlift stemmed not from errors in operations, but from the poor decision to airlift that was made in the first place. Once embroiled in the situation, there was little the Germans could do to keep from losing airfields, to replenish their supply of aircraft, or to establish proper housing for the ground crews that froze to death on the steppe. It was early in the decision making process that the real error was made—a logistical miscalculation (or rather in this case, a non-calculation) that cost the lives of hundreds of thousands of men.

1 Vegetius Renatus, The Military Institutions of the Romans, Book III.

2 Millett, “Logistics and Modern War,” 200-201.

3 Hayward, “Stalingrad: An Examination of Hitler’s Decision to Airlift.”

4 Hoyt, 199 Days: The Battle for Stalingrad, 194.

5 Hayward, “Stalingrad: An Examination of Hitler’s Decision to Airlift.”

6 Ibid.

7 Ibid.

8 Millett, “Logistics and Modern War,” 203.

9 Hoyt, 199 Days: The Battle for Stalingrad, 201.

10 Beevor, Stalingrad, 336.

11 Vegetius Renatus, The Military Institutions of the Romans, Book III.

12 Hoyt, 199 Days: The Battle for Stalingrad, 226.

13 Ibid., 214, 226.

14 Ibid., 227.

15 Beevor, Stalingrad, 335.

16 Hoyt, 199 Days: The Battle for Stalingrad, 226.

17 McTaggart, “Winter Tempest in Stalingrad,” World War II.

18 Hoyt, 199 Days: The Battle for Stalingrad, 214.

19 Ibid., 279.

20 Tunner, “Over the Hump: The Berlin Airlift.”

21 Ibid.

22 Miller, To Save a City: The Berlin Airlift 1948-1949, 28.

23 Brunhaver, “Lifeline from the Sky: The Doctrinal Implications of Supplying an Enclave from the Air,” 28.

24 Miller, To Save a City: The Berlin Airlift 1948-1949, 81.

25 Brunhaver, “Lifeline from the Sky: The Doctrinal Implications of Supplying an Enclave from the Air.” 25.

26 Tunner, Over the Hump, chap. 5.

27 Ibid.

28 Tunner, “Over the hump: The Berlin Airlift.”

29 Brunhaver, “Lifeline from the Sky: The Doctrinal Implications of Supplying an Enclave from the Air,” 29-30.

30 Harris, “1948: The Berlin Airlift,” 48-63.

31 Glines, “Operation Vittles: The Berlin Airlift.”

32 Miller, To Save a City: The Berlin Airlift 1948-1949, 100

33 Ibid., 65.

34 Ibid., 108-109.

35 Ibid., 109.

36 Richard Harris, “1948: The Berlin Airlift,” 63.

37 Miller, To Save a City: The Berlin Airlift 1948-1949, 117.

38 Brunhaver, “Lifeline from the Sky: The Doctrinal Implications of Supplying an Enclave from the Air,” 17.

39 Military Improvisations During the Russian Campaign, 62.

CHAPTER 7

D-DAY:

PLANNING MEETS IMPROVISATION

“The success of an eventual Allied invasion of Europe would depend above all on their ability to feed in troops and equipment at a higher rate than the enemy.” 1

Martin Van Creveld

Central transport logistics challenge: supplying the Allied force in France with 16 million tons * of supplies (2.83 kilograms [6.25 pounds] of rations per day per man, 137,000 jeeps, trucks, and half- tracks, 4,217 tanks and fully tracked vehicles, 3,500 artillery pieces, and 12,000 aircraft).

The morning of June 6, 1944 was cloudy and gray. In the water off the coast of France lay 5,000 ships and over 150,000 Allied service men, waiting to invade the Normandy beaches in the first stages of an assault on Adolf Hitler’s Fortress Europe. The D-Day invasion during World War II was preceded by two years of meticulous planning and strategizing, including amphibious rehearsals, aerial spy missions, supply drops to the resistance in France, railway bombings, attacks on important German industries, and isolation of the battlefield. This multi-modal attack on an 80- kilometer (50-mile) stretch of the German-held French coastline was the first of its size and kind. It was the largest military air, land, and sea operation ever undertaken. Unlike conventional warfare, in which armies walked toward each other across a field, or World War I warfare, in which armies shot at each other from trenches, this invasion was conducted on a number of mini-fronts and depended on an unprecedented combination of air, land, and sea transport for its success.

Planning, Strategy, and Buildup

The United States entered World War II in December 1941, after the surprise Japanese attack at Pearl Harbor and ensuing German and Italian declarations of war. At this time, the United States also began the American British Conversation with Britain, in compliance with their agreement to jointly defeat Germany and Italy in case the war developed two fronts. A project of this size and scope required nothing less than constant cooperation and information sharing between the United States and Britain. It was that first proposed a cross-Channel attack, a plan that was then refined at Allied conferences in Casablanca, Quebec, Cairo, and Tehran.

The established method of attacking a sea fortress was to land elsewhere and then capture it from the landward side. However, this attack across the English Channel, known as Operation Overlord, would take a different approach. Britain had a unique outlook on the nature, timing, and location of the second front against Germany. It was more inclined to find a sea-borne solution because it was, unlike the United States, historically a maritime power and had a better understanding of amphibious operations. 2 In addition, the country had already been at war for two years, suffering great losses at the Battles of France, Britain, and the Atlantic. So the British were cautious about this next attack—they favored waiting a few years and wearing down the German army first. The United States, on the other hand, favored immediate, direct action. In the end, these differences complemented each other. “If the British saw the tactical problems more clearly, the Americans were enabled to give freer rein to their imagination and to arrive at bolder offensive concepts,” writes historian Gordon Harrison. 3

Winston Churchill warned logisticians about the need for careful planning. If haste prevailed over reason, he said, the beaches of France might end up “choked with the bodies of the flower of American and British manhood.” 4 The British and Canadians had learned from their World War II defeats at Dunkerque (1940) and Dieppe (1942) that an invasion of the German-held Continent would require more meticulous preparation and more strength than could be gathered in time for a 1943 invasion. Therefore, the cross-Channel attack was postponed until 1944.

When choosing an invasion site, the Allies knew they would need land flat enough for landing zones and sheltered enough from the wind to facilitate round-the-clock re-supply. This land would also need enough beach exits to allow the invading force to move inland, plus a good road network behind the beach. The first site that matched these requirements was Pas de Calais, but the Germans suspected that the Allies might land there and began concentrating their fortifications in the area. The next best option was Normandy. Capturing this area, which lay directly across from southern England, would make the French ports of Cherbourg, Le Havre, Brest, Nantes, L’Orient, and St. Nazaire accessible. In fact, the Normandy region as a whole was a good choice because it was less securely defended than Pas de Calais.

Planners and logisticians began work immediately, and preparations for the attack and the assembly of the powerful armada went on for two years before D-Day. In fact, all planning for the operation was governed by logistics, from the selection of landing beaches, to the drawing up of objectives, to the size and composition of the assault force. 5 The Allied invasion force would collectively require 16 million tons * of supplies: 6.25 pounds (2.83 kilograms) of rations per day per man, 137,000 jeeps, trucks, and half-tracks, 4,217 tanks and fully tracked vehicles, 3,500 artillery pieces, and 12,000 aircraft. 6

The naval aspect of the invasion was nicknamed Operation Neptune, and it was preceded by full-scale rehearsals on English beaches. By June 1944, the necessary troops were amassed in England. These included 1.7 million British troops, 1.5 million American troops, 175,000 Dominion troops from Britain’s colonies, and 44,000 troops from other allies. The Allies also gathered 1,300 warships, 1,600 merchant ships, 4,000 landing ships, 13,000 aircraft, and 3,500 gliders.

Allied preparations for D-Day also included the pre-invasion bombing of roads, bridges, rail junctions, German supply lines, transport centers, and fuel supplies in France and Germany. The French resistance helped in this effort. This tactic produced its intended effect, preventing Germany from being combat-ready. The Luftwaffe was weak, as was the German navy. Never being sure exactly where the Allies would invade, its only defense was to place 500,000 land mines and other obstacles along the 4,827- kilometer (3,000-mile) coast.

The Allies were, however, superior in intelligence, and made sure that every plan made in secret was accompanied by a deception plan that would be leaked to the enemy. They routinely faked radio signals and troop detachments. They even convinced the Germans of an Allied landing at Pas de Calais by stationing a phantom force led by General George Patton at Dover (across the Channel from the supposed landing target). 7 They bombed all along the French coast, but concentrated their bombing on the Pas de Calais region to reinforce the illusion of an attack there. Even after the Normandy attack began, the Germans remained convinced that the Allies would land at Pas de Calais, so they diverted their resources to that area and weakened the forces stationed at Normandy.

June 6 and Following

The cloudy weather on the morning of the invasion created many problems for the Allies. The night before, many of the Allied soldiers who had parachuted into France to secure beach exits, towns, and road junctions had been dropped in the wrong places. Naval gunners and bomber planes were unable to knock out German defenses, like mines on the beaches and machine guns on the bluffs. Many soldiers did not even make it out of the landing craft—as soon as the doors opened they were shot down by enemy fire, turning the water along the beach bright red. Only one third of the first wave of American attackers at Omaha Beach reached the shore, and once there many were killed as they attempted to inch their way up the beach and over the bluffs.

As the day wore on, the situation at Omaha improved. After hiding behind sea walls and other shelters, the Americans held their ground and were able to continue moving up the beach, over the bluffs, and onto the flatland above. By nightfall, the Allies were in control of the entire Normandy beachhead. They were then able to progress inland, defeating the German occupation force town by town until all of France was liberated. With the loss of France, Germany was deprived of resources such as labor and the ports that sheltered its U-boats and detected Allied planes on bombing runs. It was the capture of France that gave the Allies the strategic, geographic, and logistical base they needed to defeat Germany.

Transport Logistics Challenges

The logistics managers who planned the Normandy invasion faced a major challenge: establishing ports on the French coast through which they would supply the Allied army during its attempt to defeat Germany and free Europe. This challenge inspired planners and logisticians to develop new technology and innovations, making the D-Day invasion remarkable for its transport logistics as well as its military achievements.

How would the Allies move men, equipment, and supplies safely and rapidly into France? The solution was to set up a multi- modal supply line, combining land, sea, and air transport. Some transport vessels carrying ammunition and provisions were ensured a safe journey directly from the United States to the French coast, without a stop in England, because the Allies’ anti-German U- boat campaign in the Atlantic had been so successful. However, a successful sea voyage from naval bases in England depended upon a number of factors. Meteorologists had to select optimum weather and tide conditions for an amphibious landing. The armada, with the help of radar and buoy-laying vessels, had to be guided through waters infested with German mines and U-boats. A number of other workhorse vessels accompanied the tanks and troops, including salvage and rescue vessels, coal ships, oil tankers, water tankers, boats to lay telephone cables, dispatch boats, landing craft, and repair vessels. Soldiers were carried onto the Normandy beaches in amphibious landing craft, and Sherman tanks were outfitted with propellers to get them through the water and onto shore. However, the attack’s long-term logistical challenge also loomed before logisticians: securing numerous ports through which to run a steady supply line that would fuel their assault on the Continent. Amphibious warfare necessitates bases, ports, and supply lines immediately behind combat troops, 8 and the Normandy invasion was no exception. The entire operation called for the delivery and distribution of a formidable 780,000 tons * of supplies per month. 9 The first task, then, was to create enough elbow room on the Normandy coast to set up a base from which to supply the push inland by a rapidly growing invasion force. The beachhead had to be enlarged to provide space for the necessary logistical buildup and, finally, room to maneuver for the breakout. This called for careful beach organization, including clearing the beach of mines and other obstacles, directing traffic (both on shore and afloat), managing troop landings and supply deliveries, and establishing and operating supply depots.

The innovations that helped to facilitate this beach enlargement were two pre-fabricated harbors, called Mulberries, which were built in England, towed across the Channel by tug boats, and re- assembled off two Normandy landing beaches.These harbors, which were designed to last 90 days, featured breakwaters and floating piers. They had the capacity to hold seven deep-draught ships, 20 coastal craft, 400 tugs/auxiliary vessels, 1,000 smaller craft, and to receive 7,000 tons of supplies per day. The open landing beaches, with the help of Mulberries A and B, were expected to handle 15,000 tons * of cargo per day by June 16, and 46,000 tons of cargo per day by 90 days after D-Day. 10

However, the Mulberries were not enough. The Allies also urgently needed large, established ports to fuel their combat operations in France and soon in the rest of Europe. By 41 days after D-Day, the Allies had planned to have ports at Cherbourg, L’ Orient, and Brest captured from the Germans and operational in order to handle the majority of the operation’s logistical requirements. By June 18, the Allies had achieved 72.8 percent of their targeted level of supplies. 11 Unfortunately, much of what was planned went wrong. The necessary ports were not captured on schedule, and the Germans did much more damage to Cherbourg on their way out than was expected. When it became operational in July, Cherbourg could only handle 2,000 tons* of supplies per day. In addition, Mulberry A was destroyed in the devastating Channel storm of June 19 to 22, meaning that the Allies could only achieve 57.4 percent of their targeted supply level. 12 The fact that the landing beaches became highly efficient operations centers faster than originally planned, however, helped compensate for these losses. By the end of June, Omaha Beach was averaging 13,500 tons* of supplies per day, which was 115 percent of its planned capacity. Utah Beach, another American landing site, achieved 7,000 tons* per day (125 percent of its target). The success on the beaches was not in vain: Martin Van Creveld points out that, “The success of an eventual Allied invasion of Europe would depend above all on their ability to feed in troops and equipment at a higher rate than the enemy.” 13

Summary

Two useful logistics concepts were at work in the Allied invasion. First, historians emphasize the importance of the Allies’ thorough training, planning, and preparation for logistics support. 14 “Tactical and operational acumen” were not necessarily the key to their success—instead it was the Allies’ overwhelming superiority in material, air transport, and firepower. This justified their preoccupation with logistics and with the development of the Continental logistical base. 15

On the other hand, logistics operations also require improvisation, risk taking, and flexibility. While careful logistics plans were necessary, the success of the D-Day operations was not due to the operation’s smooth implementation. D-Day presented a number of logistical difficulties to the Allies: heavy surf; navigational errors; fierce enemy resistance; inadequate waterproofing of vehicles; slow beach clearance; and planning that turned out to be “too rigid and too detailed.” 16 Success was a result of determination, common sense, risk-taking, and the ability to successfully improvise and quickly replace faulty plans with new ones. 17 D-Day reinforces the value of careful planning coupled with flexibility and a willingness to abandon the best-laid plans in favor of new ones.

1 Van Creveld, Supplying War: Logistics from Wallenstein to Patton, 206.

2 Hall, D-Day: The Strategy, the Men, the Equipment, 14.

3 Harrison, Cross- Channel Attack, 10.

4 Ibid., 5.

5 Hall, D-Day: The Strategy, the Men, the Equipment, 114.

6 Hammond, Normandy, 14.

7 Hall, D- Day: The Strategy, the Men, the Equipment, 38-39.

8 Millett. “Logistics and Modern War,” 204.

9 Hall, D-Day: The Strategy, the Men, the Equipment, 114.

10 Ibid., 114.

11 Hammond, Normandy, 35-36.

12 Ibid., 36.

13 Van Creveld, Supplying War: Logistics from Wallenstein to Patton, 206.

14 Hall, D-Day: The Strategy, the Men, the Equipment, 14.

15 Ibid., 129.

16 Van Creveld, Supplying War: Logistics from Wallenstein to Patton, 209.

17 Ibid., 236.

CHAPTER 8

RELOCATING THE TEMPLES OF ABU SIMBEL

“In the book ‘The World Saves Abu Simbel’ Georg Gerster acknowledges ‘ the clockwork precision of the work’ but adds …‘the archaeologists…right up to the last minute strongly opposed the humpty-dumpty project as a “solution of despair” because they regarded the dissection of the temples as an act of wanton destruction…Estimates by experts…are on record, according to which the loss of one out of every three blocks was to be expected.’” 1

Georg Gerster

Central transport logistics challenge: transporting, warehousing, relocating, and reconstructing two ancient temples that had been cut into 1,032 separate blocks.

Just south of Aswan in southern Egypt lie the majestic Temples of Abu Simbel. These ancient monuments to Ramesses II and his wife were carved out of a hill overlooking the Nile between 1274 and 1244 BCE. The larger, more imposing temple demonstrates the king’s power, and was positioned to warn anyone attempting an invasion from the South of the strength of Ramesses’ kingdom. The smaller temple was built in honor of his wife, Queen Nefertari. However, the Temples of Abu Simbel, as they silently overlook the blue water and brown cliffs of Lake Nasser, reveal a more recent story. Theirs is the story of a groundbreaking salvage operation that required international cooperation and logistics management— and that ended with stunning success.

Swiss explorer Jean-Louis Burkhardt discovered the two sandstone temples in 1813, by which time the shifting desert had covered their façades with sand. Once exposed, the larger temple (called the Great Temple) was found to be 30 meters high and 35 meters wide (98 feet by 114 feet). Four colossal statues of Ramesses, each 20 meters (67 feet) high and weighing 1,200 tons, guard its entrance. Eight pillars hold up the ceiling of its large inner room, which is surrounded by a number of smaller rooms. The Temple of Hathor next door has six standing statues in front, each 10 meters (32 feet) high. Inside, six large pillars support the central hall. The façades, walls, and ceilings of both temples are covered with elaborate carvings and paintings depicting various scenes, including the military victories of Ramesses’ reign, the King and Queen’s trip to the underworld in a funerary boat, the Queen honoring her husband, and the Queen honoring the gods Hathor and Mut. Over 3,200 years after construction, the colors remain vibrant and the pictures clear.

The Abu Simbel temples have mesmerized travelers for years, boasting a history of human attempts to salvage them. Amelia Edwards, a British adventurer and writer, visited the temples in 1874 and oversaw Ramesses’ first cosmetic surgery: removing the unsightly bits of white plaster that were left over from explorer Robert Hays’s attempt to make a cast of his face. She directed her assistants to chip off the plaster. Then they prepared strong coffee and used it to dye the white patches to match the surrounding sandstone. 2 However, when the rapidly rising waters of the newly created Lake Nasser threatened the temples in the 1960s, it was clear that it would take more than coffee to save them.

The ancient monuments of Nubia (a region in southern Egypt and northern Sudan) were first threatened in 1902, when the Egyptian government built a dam on the Nile River at Aswan, flooding a small area to the south. Further work on the dam in 1912 and 1936 caused even more flooding. In the 1950s the government decided to build an entirely new dam seven kilometers (4.3 miles) south of Aswan, which would better control the flooding of the Nile River.

The new Aswan High Dam created Lake Nasser, a 500-kilometer by 25-kilometer (310-mile by 15-mile) body of water, and submerged 15 of Nubia’s monuments. Some of these monuments were eventually dismantled and relocated to safer regional sites, while others were donated to museums around the world. Before the Aswan High Dam was built in the early 1960s, the Egyptian government recognized the importance of the Temples of Abu Simbel. “It is the inordinate desire of every Egyptian to see that the great temple of Abu Simbel will be protected from the inundation,” it wrote in a 1955 report. “But, nevertheless, there is no alternative but to sacrifice it for the good of the country.” 3 If there were no way to rescue the temples from submersion, the government proposed making plaster casts of all statues, taking paper impressions of the scenes and inscriptions, publishing a book on the temples, taking a full photographic record, and transferring some smaller statues to a new museum in Aswan. The report then went on to propose two other plans for salvaging the temples. The first was to construct a dam opposite them as high as the top of the surrounding cliff (182 meters/597 feet).The second was to create a vertical entrance into the submerged inner temples. 4 Other rescue proposals came from engineers, architects and archaeologists all over the world: enclosing the temples in a glass aquarium and letting them drown in Lake Nasser, or building barges under the temples so that when the water rose, the temples would as well. One ambitious engineer even proposed raising the temples above the Lake on hydraulic jacks.

In 1964, the Egyptian government appealed to the United Nations Educational, Scientific and Cultural Organization (UNESCO) for funds to salvage the Abu Simbel temples. UNESCO then appealed to governments around the world for money and technical expertise to move this and other Nubian monuments. Abu Simbel was the flagship of the campaign.Vattenbyggnadsbryån (VBB), a Stockholm company of consulting engineers, was chosen for the project. Their proposal, nicknamed the “VBB Scheme,” involved cutting the temples into pieces and relocating them to a site 64 meters (209 feet) higher. This type of maneuver had been attempted only once before when a church weighing less than 10,000 tons was moved to a location two meters (6.5 feet) higher than its original spot. 5 The estimated cost of the Abu Simbel project was $36 million. Egyptian President Gamal Abdel Nasser offered $12 million from the Egyptian national budget, and United States President John F. Kennedy offered an additional $12 million in fall 1963. When the last third of the money came from other UNESCO nations and private donations, the VBB Scheme was finally accepted. 6 A consortium of companies worked on the project: the French company Grands Travaux de Marseilles, Hoch-Tief of Germany, Impregito of Italy, the Swedish companies Sentabex and Skånska, and the Egyptian company Atlas. It was supervised by VBB and the Egyptian government, with a number of internationally known engineers, archaeologists, and architects as advisers. One thousand seven hundred workers and 200 staff members were employed, so a workers’ settlement complete with a hospital and post office was built on a nearby plateau. Some of the workers included maristi , or marble cutters, from northern Italy’s marble quarries. 7 The multiplicity of languages spoken on site made communication a challenge. Because of Abu Simbel’s remote location and the fact that the airstrip, a mile away, was only accessible by four-wheel drive vehicles, barges were used to bring supplies down the Nile. It sometimes took as long as five months for shipments to arrive from Europe.

The first step in the relocation process was to cover the temples’ façades with 5,000 truckloads of sand to protect them during the project, with metal conduit tunnels leading to the temples’ front entrances. 8 Construction of a coffer dam across from the temples also began right away. At 730 meters (2,400 feet) long and 37 meters (121 feet) high it would hold the rising waters of Lake Nasser while the temples were cut into pieces and moved to higher ground. At one point during construction, heavy rain in Ethiopia brought the water within two meters of the top of the barrier. The coffer dam’s construction was truly a race against time, as the lake was filling quickly. Laborers worked day and night throughout 1964. Finally, in February 1965, the cofferdam was finished and workers could begin to dismantle the temples.

Because the temples were originally hewn out of a mountainside, the tops of the cliffs above them had to be dug away to reach the façades and inner rooms. The project contract stipulated that no explosives could be used, so 150,000 cubic meters (164,000 cubic yards) of rock had to be removed using steel rippers, pneumatic tools, and bulldozers. Drills were only used outside the temples. To protect the temples from the vibrations caused by variations in stress as blocks were cut free, 140 tons of steel scaffolding were erected inside the temples.

Before workers could start sawing the temples into pieces, they tested disk, wire, chain, and handsaws to find which ones were best suited for cutting different parts of the rock. Specially designed handsaws were used on all visible surfaces to minimize damage to the sculptured rock, and epoxy resin was painted onto the blocks to strengthen the areas around the cuts. According to the contract for the project, no cut could be more than four millimeters wide. In the end, many of the cuts were less than four millimeters wide. By the time the cutting phase was complete, the great temple had been sliced into 807 pieces and the smaller temple into 225 pieces. The blocks were 80 centimeters (2.6 feet) thick, 3 meters (9.8 feet) high, and up to 5 meters (16.4 feet) long.

Raising these 20 and 30-ton blocks and moving them to their temporary storage area required equally fastidious work. Because no lifting equipment was permitted to touch the delicate sculptured surfaces, each block was numbered and fitted with steel bars and lifting bolts that were placed at the block’s center of gravity. The blocks were also cemented with epoxy resin. A total of 23.5 tons of epoxy resin was used for the project. 9 When ready to be lifted, the blocks were cradled in yokes and cranes lifted them onto trucks with sand in their beds. This cushioned the pieces for their ride up the hill to the plateau storage area. The resin also made the surfaces waterproof to protect them during the year and a half of storage. Once in the storage area, the pieces were lined up according to a numbering system, which divided the temples into zones, rows, and specific positions. In this open-air, desert storage area, logisticians had to practice careful inventory management to keep the 1,032 pieces in order. Contrary to earlier predictions by some archaeologists, not a single stone was lost in the relocation process.

While the temples were being cut away from their original site, the area where they were to be rebuilt had been leveled and a foundation had been constructed. The last pieces to be cut out were the first to be replaced in the new location, where they were repositioned to the millimeter and anchored with concrete. The ancient Egyptians designed the Abu Simbel temples so that on February 22 and October 22 every year, the rays of the rising sun would strike three of the four statues inside the Great Temple. Only the face of the Ptah, god of the underworld, remained in darkness. Upon relocation, the temples were oriented so that this lighting phenomenon could still occur, proving the exactness of their placement.

Inside the temples, major refurbishing had to be done to restore the walls to their original appearance. Joints were filled in by hand and re-colored to match the surrounding stone. Finally, two concrete domes were placed over the completed temples to support them from above, as the hillside had naturally done before they were moved. Each dome has a free span of 60 meters (196 feet) and stands 25 meters (82 feet) high. They can bear a load of 100,000 tons. 10 Rocks were also piled on top of the domes to create a more natural appearance. After four and a half years of work, the relocation was completed in December 1968, at a cost nine percent higher than estimated.

Summary

Salvaging the Temples at Abu Simbel was an unprecedented task in its enormity and complexity. It required international and cross cultural cooperation; planning; the coordination and delegation of work among laborers, foremen, and technical advisers; transport along supply lines that stretched thousands of miles; and most importantly, the transport of large, fragile slabs of ancient sandstone. The central logistics challenge was not the act of cutting the temples into blocks—we are concerned with the job of transporting these blocks without damaging them, warehousing them according to a proper organizational scheme, and resetting them (undamaged) in the correct order. Imagine how bar codes or RFID might have sped up the warehousing and inventory management aspect of the project. However, logistics managers in the early 1960s were without this tool, and had to rely instead on hand-painted numbers on the 1,032 blocks.

An additional logistics challenge was the transport of material and workers to the job site. Viable transport modes included a small airstrip, the Nile River, and some dusty roads crisscrossing the desert—accessible only in four-wheel-drive vehicles. Though the rising water had been the curse of Abu Simbel, it became a blessing when it was used for barges to bring supplies to the work site. The procurement process for goods from Europe took as long as five months.

Project administrators had to be prepared for unexpected challenges, such as rising lake water due to rain in Ethiopia. This was a development that no one could have predicted, and yet workers were able to respond immediately and finish the coffer dam in time to protect the temples. Another unexpected setback occurred during the reassembly of the smaller temple. After it was reassembled, engineers were told that it had to be torn down and assembled again two meters (seven feet) higher. Egyptian engineers working on the lake had decided, without notifying the Abu Simbel project engineers, to raise the maximum high water mark of Lake Nasser by one meter. This threatened the smaller temple because it added 8.2 billion cubic meters (nine billion cubic yards) to the lake. The result of this poor planning and lack of communication was the duplication of work, which wasted precious time. 11 However, workers were able to recover from the setback, ultimately completing the project 20 months ahead of schedule.

Today, sand and wind are eroding the façades at Abu Simbel because they are raised above the plateau that used to protect them. However, virtually no signs of the relocation remain. Aside from the uncharacteristically round surface of the hills above and behind the temples, they look exactly as they have for thousands of years. At the inauguration, one journalist exclaimed, “Everything looks exactly as it was before! What have you done with the forty million dollars?” 12 Exploring the temples’ dark inner rooms today evokes double the sense of awe—first at their size, age, and intricate carvings, and second at the precise logistics that went into the massive task of their preservation.

1 Gerster, quoted in Säve-Söderbergh.

2 Edwards, One Thousand Miles Up the Nile, chap. XVI.

3 Ministry of Education, Report on the Monuments of Nubia Likely to be Submerged by Sudd-el-Ali Water, 16.

4 Ibid.,17-18.

5 Hawass, The Mysteries of Abu Simbel: Ramesses II and the Temples of the Rising Sun, 25.

6 Gerster, “Saving the Ancient Temples at Abu Simbel,” 709.

7 Ibid., 735.

8 Ibid., 709.

9 Ibid.

10 Kamil, Aswan and Abu Simbel History and Guide, 132.

11 Gerster, “Abu Simbel’s Ancient Temples Reborn,” 729.

12 Säve-Söderbergh, Temples and Tombs of Ancient Nubia: The International Rescue Campaign at Abu Simbel, Philae and Other Sites, 124.

CHAPTER 9

THE FALKLANDS (MALVINAS) WAR:

A FRESH LOOK AT AN OLD CONFLICT

“The whole operation benefited from the very experienced logistics organization which exists in the UK…People in the logistics organization knew what they were doing and were amazingly speedy in ge ing things going, although no long- distance exercise on this scale had taken place since 1979.” 1

Neville Trotter

Central transport logistics challenge: fighting a ba le involving 27,000 personnel and over 100 ships in a theater 12,872 kilometers (8,000 miles) from home.

Since 1833, the Falkland Islands of the South Atlantic Ocean have been administered by Britain but claimed by Argentina. In the early 1980s, this dual claim led to a short war between Argentina and Britain, known as the Falkland Islands War. Though the conflict is now more than 20 years in the past, the Falkland Islands remain a sensitive subject for Argentina, where they are referred to as the Malvinas Islands. But the war was a success for the British, who defeated Argentina even though they were fighting 12,872 kilometers (8,000 miles) from home. It is my hope that readers can look past the geopolitical disagreements surrounding the war and examine this story through the lens of transport logistics. Even those who believe the British are not entitled to govern the Falkland Islands can recognize that Britain succeeded in organizing superior transport logistics over a remarkable distance, and that this was a major factor in winning the war.

The conflict began with a dispute over an Argentine businessman who entered the waters of South Georgia Island (also a British possession) to inspect some whaling stations that he planned to purchase and dismantle. The diplomatic situation deteriorated, and on April 2, 1982,Argentina invaded the Falkland Islands and restated its claim to them. Outside observers have stated that Argentina’s ruling military junta took this action because it was losing domestic support and looking for a way to increase its popularity. By invading the Falklands, the government’s goal seemed, to the outside world, to be the diversion of public attention from its distressing domestic problems. However, some Argentines claim that the invasion was not simply a political game or an effort to increase the junta’s popularity, but in fact an assertion of the will of the Argentine people. 2 (What is more, even a conflict like the FalklandsWar would not have been enough to erase the country’s economic, social, and political challenges at that time.) For 150 years, Argentina had been unsuccessful in its attempts to have its claim to the Falklands recognized on an international level. The invasion was an attempt to raise the issue before the United Nations, where, it was thought, Argentina’s claim might finally be acknowledged and Britain would be pressured to give up its colonial claim to the Islands.

The Argentine government, however, misjudged both world opinion and the British willingness to defend the islands. Within seven weeks, the British had assembled a force of 27,000 personnel and over 100 ships, traveling 12,872 kilometers (8,000 miles) to the Falklands. Their mission was a success: they neutralized the Argentine Navy and forced them to surrender on June 14, 1982. By its end, the war would result in the deaths of 655 Argentines, 255 British troops, and three islanders.

The Falklands conflict came as a surprise to the British, who in some ways were unprepared. The British Empire had shrunk since World War II, forcing Britain to reposition itself. Britain’s new focus was on supporting NATO (North Atlantic Treaty Organisation) in defense of Europe, so the army’s capability of supporting a large force outside the NATO area was seriously diminished and they were not prepared to act unilaterally. It came as quite a surprise when, in 1982, the British government was faced with the prospect of a unilateral amphibious landing so far away in a small, remote theater. It takes an average of 21 days to sail from England to the Falkland Islands. The capital, Port Stanley, is farther from London than are Tokyo or Singapore. Yet the British were able to quickly plan and implement the logistics strategies necessary to support their invasion and maintain control of the Islands. To outsiders, this war may have seemed like a small and inconsequential conflict, but its logistics planning and implementation warrant a closer look. Outside observers have noted that Argentina’s forces were poorly trained and poorly led. They lacked adequate air-refueling capability, as well as early-warning and reconnaissance assets. “General [Leopold] Galtieri and the military junta had blundered into a war without a plan or a strategy,” writes James Corum. “From the start, the junta’s strategy of seizing the Falklands was delusional.” 3 Despite these disadvantages, the Argentine air force performed well and succeeded in destroying a number of important British ships (for example, the Atlantic Conveyor ). In fact, these air attacks provided the main threat to British logistics and to the success of the operation. The decisive, high-tech air war overshadowed a low- tech ground war—largely a sideshow—that was often slowed by logistics problems on both sides. 4

After invading the Falklands, which lie 480 kilometers (298 miles) east of Cape Horn, Argentina’s major logistics challenge was transporting troops and supplies. General Galtieri’s strategy was to airlift troops to the islands—however he was relying on air transport capabilities that Argentina did not have. The Port Stanley airport had a 1,371-meter (4,500-foot) runway that was suitable only for civilian and military turboprop planes. 5 It had been lengthened by 60 meters (200 feet) and illuminated by the Argentine force, but this was not enough. The small transport force combined with a small airfield limited the equipment that could be sent with the troops. 6 In April 1982, military and civilian aircraft brought in 9,000 personnel and 5,000 tons * of equipment and supplies. After a British air strike on the runway, the Argentines averaged two flights a day, bringing in only an additional 470 tons * of equipment. 7

Argentina’s logistics problems were much bigger than a lack of air transport. These challenges were largely due to a change in strategy. The invasion plan initially called for the deployment of 500 men; when this number was increased to 10,000, it profoundly changed the operation’s logistics requirements. 8 However, one overarching problem remained: Argentina did not have a coherent logistics plan in the hands of one central authority. 9 There were repetitions, contradictions, and misplaced priorities, resulting in general ignorance and confusion about the logistics requirements of the troops. There was no central logistics command that held daily meetings to cooperate and solve problems, or to coordinate and prioritize needs. 10

This lack of planning and communication had disastrous consequences. For example, the 10 th and 3 rd Infantry Brigades were dispatched to the Islands without prior notice or consultation with the relevant authorities, which caused congestion at the small airport. 11 When the 3 rd Brigade arrived without food or munitions, what had been a difficult logistical situation became a critical one. 12 On April 29, the Yehuin container carrier set sail empty from the mainland, missing a good opportunity to carry the supplies that would have bettered the situation on the Islands. 13

The British, engaged in a war 12,782 kilometers (8,000 miles) from home, faced even more remarkable logistics challenges. The supply chain for the Falklands War, which was known as the Air Line of Communication, stretched 4,300 nautical miles to Ascension Island. This 54-square kilometer (34-square mile) island in the mid-Atlantic was a 30-day sail or an 8.5-hour flight from Britain. The Air Line of Communication then went on for another 4,300 nautical miles from Ascension Island to the Falklands. Since Britain had no contingency plan for an operation like this, the shipping of provisions was based on plans for a NATO emergency. First, 5,000 tons ** of supplies were transported by rail from depots around the country to their ports of departure. The majority was loaded onto ships by Monday, April 3, only 80 hours after the warning order had been given.

Because the Royal Navy did not have sufficient ships available to move the personnel and supplies, 59 merchant ships were chartered and requisitioned immediately after the Argentine invasion. Thirty- seven of these merchant ships were ultimately used in operations: nine tankers (with a total capacity of 700,000 tons of fuel), four troop ships, 11 fleet support ships, and 13 logistics ships (with a total capacity of 100,000 tons * ). 14 Dispatching such a force in only seven weeks was a remarkable achievement, and cooperation from civilian companies was the key to its success. The ships requisitioned from private use moved into operation so quickly that some owners were notified as late as the day of the Argentine invasion. 15 The liner Canberra arrived in England on the Wednesday after the invasion, having just ended a 96-day world leisure cruise. On Friday, less than 60 hours after the last of 1,500 fare paying passengers disembarked, she sailed to the South Atlantic carrying 2,500 troops and a new helicopter flight deck. 16 Because the task force was assembled and dispatched so quickly, some of the stores had to be relocated en route. Items not available in time for sailing were flown to Ascension and put aboard ship by helicopter. 17 Ascension Island, the midway point in the Air Line of Communication, soon had 1,000 British servicemen stationed on it. Its aircraft parking area was small, and its fresh water supply limited, but the island nonetheless became a bustling logistics hub and inter-modal transit point. The island was the staging area for attacks on Argentine forces, as well as the re-stow area for supplies and equipment that were not ready in time for the first sea shipment from England. At Ascension, the British redistributed men, supplies, and equipment among the ships for the onward journey to the Falklands.

Aircraft movement at Ascension peaked at 400 per day; 400 additional helicopter movements brought the daily total to 800. 18 For an island that had previously seen 250 flight movements per year, this was an unprecedented amount of activity. 19 With all the air activity centered there, the supply and handling of aviation fuel became a critical logistics problem. Getting fuel from incoming tankers to the planes sitting on the Wideawake Airfield 5.6 kilometers (3.5 miles) inland was a laborious task. At first, trucks were used to haul fuel to the planes, but this was a 45-minute round trip that quickly wore down Ascension’s roads. In response, the British built a pipeline to carry fuel to waiting planes. One of the most crucial ships used in the war was the Atlantic Conveyor , a combination ro-ro and container ship that carried 14 sea Harrier jets, four Chinook helicopters, one anti-submarine warfare helicopter, six utility helicopters, 4,000 tents, helicopter cargo slings, and aluminum plating for the Harrier landing strip. The loss of this ship and most of its cargo to Argentine Exocet missile strikes on May 26 was devastating. Specifically, the lack of heavy- lift and utility helicopters limited troop mobility and crippled the amphibious landing on June 8. The loss of helicopter cargo slings meant that instead of using aerial sling loads to re-supply forces onshore, the Brigade had to rely on smaller helicopter loads, which took longer to handle. R.N. Whittaker, a Royal Air Force supply officer during the War, called the loss of the Conveyor the “logistics low point” of the operation: “There were a few hectic hours which showed the value of careful logistics documentation even in war and highlighted the operational need to be able to assess rapidly the effect of such losses not only in theater but also, through their replenishment, on all other residual commitments.” 20

The amphibious assault will not be discussed at length; however, it is worth noting one example of poor planning. British forces would normally have taken 3,000 vehicles, including four-ton trucks, into such a situation. But because only 16 to 19 kilometers of the Islands’ roads were paved (10 to 12 miles), and all of them in the Port Stanley area, only 300 vehicles were dispatched. Of 300 vehicles, very few were of the all-terrain variety that would have suited the challenging topography. The soldiers depended on helicopters and on what they could carry on their backs for logistics support. The lack of troop transport helicopters due to the sinking of the Conveyor compounded this transport problem, and the result was that the soldiers had to march 136 kilometers (85 miles) across the island in Antarctic weather, with each man carrying 45 kilograms (100 pounds). 21 Many suffered from hypothermia and trench foot.

Though it was short and relatively inconsequential on a global scale, military logisticians learned some important lessons from the Falklands War. First, logistics facilities and assets should have been carefully defended from enemy attack, for when the supply chain was disrupted there were far-reaching effects on the operation 22 (i.e. the loss of the Conveyor ). Logistics units and installations require air defense weapons equal to those of other units and installations. Second, the lack of logistics support during the amphibious assault demonstrated the need to have correctly trained and equipped logistics troops available to support an out-of-area operation. 23 If such logistics units were not available, regular troops being supplied by air should have been able to efficiently load and unload cargo. 24 Such skills would have been useful, for example, after the all-important aerial cargo slings were lost with the sinking of the Conveyor, and ground troops were left to manually unload helicopters.Third, the grueling inland marches reinforced the need to improvise and use any means possible to move men, supplies, and equipment—be it horse, mule, dog, cart, or civilian vehicle. 25

Summary

What is especially interesting about the Falklands War is not just the geographic distance between Britain and the battleground, but the short amount of time that logisticians had to plan and to procure supplies. Preparations to send a British task force began three days before the invasion; Argentina invaded on Friday, April 2 and the first British contingent sailed south on Monday, April 5. According to Neville Trotter, who served in the Royal Air Force and as a Member of Parliament, the operation worked because the British were ready for action before Argentina even invaded the Falklands:

The whole operation benefited from the very experienced logistics organization which exists in the UK. Not only do the marines go annually to Norway, but forces up to brigade strength also exercise regularly in Denmark, and annual exercises practise the large-scale movement of men and stores to Germany. People in the logistics organization knew what they were doing and were amazingly speedy in getting things going, although no long-distance exercise on this scale had taken place since 1979, when, after a year of planning, 20,000 men were moved by sea and air to Malaysia. 26

The British, while not expecting to fight a unilateral war in the South Atlantic, were at least prepared with NATO-based emergency plans. Hasty planning did lead to some mistakes and unexpected challenges, but overall the operation was successful. Air force supply officer R. N. Whittaker reflects further on the subject:

Involvement in such hot planning situations confirmed for me some old but important lessons: the value of sensible contingency planning which prepared the building blocks of capability that can be assembled as a solution to different problems…and the need for enough logistics resilience to accomplish not only the final operation plot but also the inevitable preparations that, for good operational reasons, have to be aborted. 27

Just as in the D-Day invasion, we see that planning and flexibility complement each other, and that in time-sensitive or last minute logistics operations, logisticians must practice both.

1 Trotter, “The Falklands Campaign Command and Logistics,” 38.

2 Admiral Horacio Mayorga, e-mail message to author, May 9, 2005.

3 Corum, “Argentine Airpower in the Falklands War: An Operational View,” 73.

4 Ibid., 59.

5 Ibid., 63.

6 Ibid., 63.

7 Schoch, “Logistics of the Falklands War,” 3.

8 Mayorga, No Vencidos, 180.

9 Admiral Horacio Mayorga, e-mail message to author, May 9, 2005.

10 Mayorga, No Vencidos, 178.

11 Ibid., 179.

12 Ibid., 180.

13 Ibid., 180.

14 Schoch, “Logistics of the Falklands War,” 4.

15 Trotter, “The Falklands Campaign Command and Logistics,” 34.

16 Whittaker, “Combat Logistics: The South Atlantic,” 4. Neville Trotter, “The Falklands Campaign Command and Logistics,” 34.

17 Whittaker, “Combat Logistics: The South Atlantic,” 4.

18 Trotter, “The Falklands Campaign Command and Logistics,” 40. Whittaker, “Combat Logistics: The South Atlantic,” 6.

19 Tustin, “The Logistics of the Falklands War - Part I,” 298.

20 Whittaker, “Combat Logistics: The South Atlantic,” 6.

21 Trotter, “The Falklands Campaign Command and Logistics,” 38. Tustin, “The Logistics of the Falklands War - Part II,” 400.

22 Tustin, “The Logistics of the Falklands War - Part II,” 407.

23 Ibid., 407.

24 Schoch, “Logistics of the Falklands War,” 7.

25 Ibid., 7.

26 Trotter, “The Falklands Campaign Command and Logistics,” 38.

27 Whittaker, “Combat Logistics: The South Atlantic,” 4.

CHAPTER 10

THE DOT-COM EARTHQUAKE:

CLICKS, BRICKS, AND A LOGISTICS FIASCO

“The great fallacy of the Internet bubble era was the idea that you could make a lot of money by starting a company that simply replicated a physical world practice in cyberspace. Most of these companies had no compelling value proposition; they merely got their hands on a URL and figured that this put them in business.” 1

Anthony C. Perkins and Michael B. Perkins

Central transport logistics challenge: retailers who wanted to cash in on the dot-com hype by selling their products over the Internet had to incorporate revolutionary e-business strategies into traditional “bricks-and-mortar” business plans. This new business structure had to be created and sustained while simultaneously 1) appeasing investors, who wanted to see immediate profit rather than long term growth, and 2) ensuring timely delivery and order-fulfillment for customers.

When vast numbers of sleek online retailers offer the same products at minor differences in price, the only thing that differentiates them is how fast they can deliver. And as retailers are fond of saying, there is nothing very difficult about home shopping—it is home delivery that is the challenge. This was plainly illustrated in 1999, 2000, and 2001, when a plethora of online retailers in North America and Europe began competing for e-business, selling everything from furniture to multi-vitamins over the Internet. 2 In the span of only a few months, however, many of these Internet start-ups failed and disappeared. Some famous dot-com casualties included Pets.com, eToys.com, Webvan, and Furniture.com. These companies did not simply face growing pains during the first few years of their existence, come to life at a bad time in the US economy, or fall victim to the overvaluation of their stocks. These companies deteriorated because they did not implement the e-business model that would have enabled them to compete with other businesses, online or offline.

This is also a story of over-enthusiasm on Wall Street and in the boardrooms of large venture capital firms. In addition to being built on faulty business models, many dot-coms were overvalued because their central idea—that the Internet could transform the American economy—appealed to stock market bulls. As venture capitalists pumped millions of dollars into Internet start-ups in the late 1990s, dot-com IPOs began to raise millions more to fund their businesses. In fact, some companies went public after only a few months in business. (Google, by way of comparison, was founded in 1998 and went public only in 2004.) Investors foolishly ignored traditional measures of valuation, and instead used vague arguments like “the revolutionary impact of the Internet” to justify high stock prices. 3 Many dot-coms were “hatched in the minds of Internet visionaries whose short-term preoccupation rested on attaining IPO liftoff,” writes analyst Leslie Hiraoka. “This was usually forced on the founders by pre-IPO investors like venture capitalists and underwriters, who were never interested in the drudgery of building an ongoing enterprise, but in recouping their investments.” 4

When the bubble finally burst in 2000 and 2001, it affected both new e-tailers and some traditional “bricks-and-mortar” companies who had recently begun offering online services. Here are some examples of what went wrong. EToys’s stock fell during the 1999 Christmas rush, at which time it had trouble with order fulfillment and had to use a third party to fill some shipments. In addition, shipping delays, merchandise shortages, and slow service characterized the company’s customer service during the holiday rush. 5 The seemingly reliable front-office face of the business (its website) did not match the reality or capability of its back-office operations. At the same time, eToys was competing with Amazon. com, who also sold toys online and had built a number of new automated warehouses capable of shipping one million packages per day.

Webvan offered home-delivery of groceries within a 30 minute- window of the customer’s choosing, and sold over 300 types of vegetables, 350 varieties of cheeses, and 700 wine labels through its Web site. 6 It suffered first from logistical problems, such as equipment breakdown in the warehouses and traffic jams that delayed deliveries. The high costs of its activities also hurt Webvan. The company attempted to expand quickly, and spent so much establishing infrastructure in multiple geographic areas that it eventually ran out of money. Webvan made errors in estimating operating costs, as well as the scale of the traditional grocers with which it set out to compete. Grocery items are bulky, heavy, and often perishable; therefore, Webvan should have outsourced transport and delivery of its products to an expert logistics provider. Since the demise of Webvan, e-grocers have learned to avoid “world-conquering ambitions” and instead tend to proceed cautiously. They have learned to fully utilize existing distribution channels (physical stores), with online sales as a niche product. 7 Kozmo.com catered to city-dwellers who wanted fast home delivery of small convenience items. The company promised free delivery on all orders, no matter their value. This turned out to be impossible, as each delivery cost $10 in labor and overhead. This sum did not even include Kozmo.com’s marketing expenditures or the cost of the goods it delivered. The company had recruited a supply chain manager from Ernst & Young and a logistics expert from UPS, but these steps were not enough to save it. 8 The promise of free home delivery turned out to be an unattainable dream, and Kozmo.com soon joined the ranks of other failed start-ups.

Summary

A number of factors contributed to the dot-com bust, including the Federal Reserve’s interest-rate increases in 1999 and 2000, and increased spending for the Y2K switchover. However, many failed retailers had one thing in common: they failed to take into account the essential storefront aspects of business. These bricks- and-mortar practices include quality customer service, inventory management, and efficiency in shipping and delivery.

A 1999 report by Gartner analyst Alexander Drobik forecast a burst in the dot-com bubble that would have major economic implications for the IT industry. Drobik predicted that by 2001, e-business would fall into a “period of disillusionment” due to inadequate strategies, poor planning, rapid growth, long implementation times, and mistaken business models. He proposed that successful e-businesses would understand and implement both bricks-and-mortar strategies and online strategies. 9

Drobik’s prediction did not use the word “logistics” but it is clear that this ingredient was lacking in the business plans of many failed dot-com retailers. In their excitement over the novelty of one- click home shopping, they ignored basic principles of supply chain efficiency. Entrepreneurs set up virtual shops, but did not spend enough time planning back-end operations. In 1999, Gartner analyst Daryl Plummer predicted that, “The companies with warehouses, supply chain management, and solid customer service are going to be the ones that survive, not just the ones that slap up a website.” 10 As it turns out, he was entirely correct. John Cassidy writes that Internet retailing failed because it is, “more about retailing than the Internet.” A retailer (online or offline) is a distributor, and building a distribution system is a costly undertaking: “Whereas a state-of- the-art retail Web site might cost $25 million a year to develop and maintain, a nationwide system of warehouses and delivery trucks can cost $1 billion to construct and another $200 million to operate.” 11

Since the dot-com bust, we have seen a recovery in online retailing, which demonstrates that traditional retailers and surviving e-tailers have discovered the need for carefully implemented supply chain management practices. Retailers can augment their business by using the Internet as a unique distribution channel, but they cannot rely wholly on the Internet, excluding traditional distribution channels. Also, more retailers now recognize the need for software applications that will centralize data, automate business processes, and enable a company to effectively communicate with other supply chain players.

Retailers that survived the dot-com earthquake have in place solid logistics and distribution strategies that often combine both online and physical presences. If failed Internet retailers had been pioneered by freight logistics providers from the outset, they may have had a better chance at survival. Their failure demonstrates the importance of proper logistics strategies to the functioning of global supply chains.

1 Perkins, The Internet Bubble, 275.

2 Cassidy, dot.con, 239.

3 Ibid., 288.

4 Hiraoka, Underwriting the Internet, 110.

5 Gorchov, “Pundits Point to e-Toys as Dot-Com Dud.”

6 Cassidy, dot.con, 239.

7 Totty and Grimes, “If at first you don’t succeed...”

8 Cassidy, dot.con, 245.

9 Drobik, “The End of E-Business,” 2.

10 Vogelstein, “A cold bath for dot-com fever.”

11 Cassidy, dot.con, 317.

PART II

Present

CHAPTER 11

THE GLOBALIZATION OF TRANSPORT IN THE

TWENTIETH CENTURY

One day in 1937, Malcolm McLean sat on a pier in Hoboken, New Jersey. As he waited to load a shipment of cotton bales onto a vessel, he watched port workers manually unloading trucks and putting the cargo into slings for transfer onto a ship. Once the cargo was on deck, it would have to be unloaded again and stowed in the hold for the voyage. McLean wondered why no one had thought of saving time and effort by simply putting the trucks on board the vessel. Could not the full truck be transported, without its contents being manually loaded repeatedly? This would also eliminate the need to move the cargo onto another truck or train car at the port of delivery.

McLean’s idea was met with skepticism from the shipping industry. Personally convinced of the concept’s potential, he founded Sealand, Inc. and in the 1950s began implementing container technology on large ships. Sealand’s ship the Ideal X left Newark, New Jersey on April 26, 1956, carrying 58 containers to Houston, Texas. In the same year, the Maxton joined the Ideal X in its Houston service. Fitted with 62 container slots, it was one of the first ships designed specifically for containers. The White Pass and Yukon Railway Company had constructed a purpose-built container ship, the Clifford J. Rogers in 1955, which began carrying containers across the Pacific. Other groups in the UK and North America developed primitive container technology in the 1950s as well. However, it was not until McLean’s invention and the ensuing ISO standardization of the 1960s that containerization revolutionized shipping.

Containerization is now the globally dominant transport system whereby standard containers are loaded onto container ships, trucks, and freight train wagons. It eliminates the need to lift cargo off ships with cranes and slings or to move palletted break bulk cargo from the quayside with forklifts. It lessens the damage, delays, and cargo pilferage that were so common in break bulk shipping of the past. The container system revolutionized and speeded up transport, largely replacing break bulk shipping because it integrates rail, road, canal, and maritime modes.

At the same time that containerization caught on, new technologies were being developed in rail transport, specifically the change from the boxcar to the stacked, twin deck container car. While the trucking industry saw the introduction of the new tractive unit, airfreight benefited from the development of the widebody aircraft. The two post-war innovations on which we will focus are the container and the widebody aircraft, as they are two of the most important machines powering international trade today.

Post-War Developments in Containerization

The invention of the container was preceded by innovations in port selection, construction, and operations. Before the eighteenth century, ports were limited to naturally occurring harbors. By the 1900s, engineers were able to build and maintain structures to shelter ships from the sea’s battering, such as wet docks where ships unloaded inside a set of protective locks, thus reducing reliance on the protection afforded by natural harbors. In the years of economic recovery after World War II, seaport congestion increased with the boom in global trade. Larger barges facilitated faster turnaround and improved ship-to-port handling, and new vessel types, such as bulk carriers and container vessels, were faster, larger, more efficient, and specialized for certain cargoes. 1 To meet the need for faster cargo movement, ports began using gantry cranes and other new offload devices. (Cargo terminals, transit sheds, liquid-storage tanks, refrigerated warehouses, and cranes had been in use since the nineteenth century.)

The use of containers became standard practice in the 1960s, at which time traditional cargo ships gave way to vessels with holds custom built for them. Sealand’s first containers in Northern Europe were 35 feet long. As the technology spread through Europe and Japan, conflicts ensued over how to standardize the containers. The resulting container was one that conformed to standard lengths of 10, 20, 30, and 40 feet. The width was fixed at eight feet and the height at eight feet and six inches. Today’s containers are 20 or 40 feet long, with container capacity measured in Twenty-foot Equivalent Units (TEU). Because most ships are geared toward containerization, container manufacturers now produce specialized designs to increase the range of commodities that can be boxed. As container technology evolved, ships, trucks, ports, lifting devices, and inland transport features such as bridges and tunnels had to be modified for container use. Likewise, as containerships become larger, port infrastructure must also be updated.Today, the biggest ships can hold up to 10,000 TEU. The ISO standardization of the late 1960s kept container size constant so that the units can be used on land with trucks and rail wagons.Thus, the container has been an essential factor in the evolution of multi-modal transport, in which cargo can remain inside a standard transport unit while traveling by sea, inland canal (barge), rail, or road. What is more, its transfer between modes can be accomplished with a standard lifting device.

Containerization has revolutionized freight movement all over the world, and its advantages are many:

• door-to-door service and greater convenience

• no intermediate handling at trans-shipment ports, resulting in labor savings, better cargo handling, and better cargo security

• quicker transits, leading to trade development and better cargo premiums

• fleet rationalization

• through documentation and a through rate

• the growth and emergence of new markets

• added value to ports and regional economies

• reduced loading time

• lower shipping costs

The combination of faster transits, reliable schedules, and increased service frequency has led importers to hold reduced stock, allowing them to reduce their working capital, which cuts the risk of obsolescent stock, and produces savings in warehouse accommodation needs. 2 McLean’s early idea of truck-and-container transport also inspired today’s roll on/roll off shipping (ro-ro).The ro-ro concept, however, dates back to 1849, when it was first used to ferry railway wagons over the River Forth in Scotland.

The Widebody Aircraft and the Growth of Air Cargo

During the Cold War, the US Government allocated large amounts of funding for scientific research in an effort to remain technologically ahead of the Soviet Union. The flurry of research focused on many types of transport technology, including spacecraft, but one of its more practical results was the development of jet technology. In 1969, Boeing debuted its 747, the first widebody jet in history—a force that would forever change global transport. It featured two aisles, seating for as many as 450 passengers, an upper deck over the front section of the fuselage, and four engines under its wings. This jet was twice as large as any other Boeing jet and 80 percent bigger than the largest jet of the day, the DC-8. Pan Am was the first airline to purchase the Boeing 747 and fly it commercially, and soon there were 16 widebody aircraft in the sky. When other manufacturers saw the economies of scale to be gained from the widebody jet, they began building their own models. Douglas built the DC-10 in 1970 and Lockheed the L-1011 one month later. The widebody aircraft did not just give airlines the ability to carry more passengers—it facilitated the growth of air cargo. In 1972 Boeing’s 747 Freighter debuted, featuring a pivoting nose for front loading. The growth of air cargo was also encouraged by runway renovations and extensions, and improvements in cargo handling at terminals and airports. Today, with the globalization of production and distribution, air cargo has become increasingly important for the movement of goods because it supports just-in- time operations on different continents.

Airfreight is commonly used for the transport of perishables and lightweight, high-value goods. It has contributed to economic development in certain areas, assisting, for example in the development of high-tech industry clusters in Penang, Malaysia and Subic Bay, Philippines. As the preferred transport option for perishables, airfreight is also proving to be valuable to landlocked and developing countries that export horticultural products. For example, Kenya commands a large percentage of the European market for flowers, fruits, and vegetables.These exports would not be possible without the reliable, speedy, temperature-controlled transport that air cargo makes possible.

Multi-modalism: Advantages and Characteristics

Modern freight logistics is built on multi-modal transport, which facilitates fast, low-cost global distribution. In today’s globalized environment, each step in production (design, research, component units, and manufacturing) can take place on a different continent. In fact, much of modern trade is not in raw materials or finished goods, but in semi-finished goods. Since traditional port-to-port operations for product shipment are no longer viable, multi-modalism offers door-to-door or warehouse-to-warehouse services involving two or more forms of transport.The merchandise can usually be conveyed in the same unitized form throughout the entire transit, eliminating the need to move break bulk cargo with nets, slings, and forklifts between transport modes.

An efficient global multi-modal network is one that overcomes trade and time barriers to meet customers’ shipping demands. Its additional advantages are many: multi-modal transport develops new markets; improves product quality; lowers transit times; reduces packing; aids the growth of high-tech, fast-moving consumer markets; and brings the international business world together in its objectives and ideology. 3 The growth and development of global multi-modal operations are driven by:

• new technology

• cooperation among operators in all transport modes and terminals

• trade blocs (EU, NAFTA, ASEAN, GCC, Comesa, SADC, and others)

• changing world markets

• free zones and industrial parks 4

• streamlined conventions

Shippers favor multi-modalism for a number of reasons, in addition to its facilitation of offshore manufacturing and global distribution. Its reliable and frequent service over a global network is perfect for just-in-time operations. Its purpose-built equipment is ideal for specialized commodities, and it is a good marketing tool for firms. Documentation is minimal, and through rates are available. Transit times are quicker, and the high tech operations of terminal warehousing providers can add value to the supply chain.

European multi-modal transport often incorporates road and rail. In accompanied combined transport, the entire truck with its driver is transported by rail from Terminal A to Terminal B. This is known as a “rolling road” or “rolling motorway” (ro-mo). In unaccompanied combined transport, the loading units (containers, swap bodies, or semi-trailers) are removed from their trucks and transported by rail from Terminal A to Terminal B. In both accompanied and unaccompanied combined transport, the driver continues the truck’s road journey at Terminal B.

Regional Logistics Hubs

Cargo needs to move swiftly from one mode to the other, with or without containerization. This requirement is leading to the development of increasingly sophisticated logistics hubs, such as Singapore, Dubai, and Rotterdam. Because of its cross border dimensions, international hubbing is more complex than hubbing within a single-market. It also involves not only the carriers but also, very significantly, the activities of manufacturing companies and value-adding freight logistics providers (FLPs). 6

The port’s role in the transport system is directly related to the services it provides for ships, cargo, and overland transport systems. Multi-modal transport helped ports evolve from their break-bulk and terminal focus to an expanded role as fundamental links in global distribution chains. It also helped create new concepts, including value adding activities by FLPs. The seaport/ free zone combination is an ideal location for activities such as light assembly, packaging, labeling, distribution, and inventory management. A successful regional logistics hub does not happen overnight. It calls for a specific mix of ingredients: 7

• Adequate multi-modal transfer systems

• Good telecommunications systems

• Reasonable port charges

• Adequate cargo and container handling facilities

• Numerous berths and container terminals of varying sizes, capable of handling various commodities, including dangerous goods

• Available rail and road connections to link the hub with local consumer and industrial areas

One very important type of hub is the sea-air hub, where goods enter by sea and then exit by airfreight for transport to the final destination. Sea-air combined transport dates back to the 1950s, when Kuhne and Nagel connected Hamburg, NewYork, and points in South America using sea and then air transport. Soon after, sea- air services between Europe and Africa were initiated. The 1960s also saw the development of sea-air combined transport from East Asia to Europe via North America’s west coast.

Airlines became involved with sea-air combined transport because they needed to capitalize on unutilized air capacities on international scheduled routes. For example, consider the United Arab Emirates in the 1970s. Air imports into the UAE consisted purely of cargo for the country’s burgeoning oil industry. Since the UAE was exporting nothing but oil at that time, planes were leaving the country with no freight at all, creating a detrimental transport imbalance. Sea-air transport via the UAE took off in the 1980s because airlines needed to fill in some of this space (see Chapter 14). While sea-air freight was once considered “fill-in” cargo, it has since developed as a product of its own.

Sea-air freight provides specific benefits to regional economies, airlines, airports, seaports, forwarders, and importers. It is a complex and potentially lucrative transport chain—a compromise between cheaper and slower sea freight and the faster but more expensive all-air alternative. Shippers and consignees look for a sea-air hub that satisfies a basic formula: it must sit midway between origin and destination, and the airfreight cost must not be more than 50 percent of the direct airfreight cost from source to destination. The sea-air hub’s location must be strategic in terms of time, transport costs, and storage costs.

In sea-air operations, savings are most clearly realized not at sea or in the air, but instead in the time spent between modes. This is the area where improvements must take place if there is to be any success as a hub. Even one extra hour at sea or on the quayside can affect this delicate balance between cost and time. The sea-air hub that capitalizes on these minutes saved will be one that meets a number of criteria:

• smooth connections between seaport and airport

• currency repatriation

• hassle-free customs procedures

• freedom from excessive regulations and freedom from the midstream introduction of new regulations

• waivers of customs duty and bonds applicable to transit cargo

• a stable political and economic climate • safety and security

• high standards in information and communication technology

• open-sky policies

• high-volume seaports

• unutilized space on freighters or belly space on passenger flights

• regular sailing and flight schedules, with low rates in both directions

• available land around sea- and airports

• reliable, low-cost labor

• close cooperation between freight logistics providers, carriers, ports/customs authorities, and airports • consumer goods (high volume and low density)

Local governments must create an environment that meets these criteria, but will take some steps to regulate sea-air hubs, such as restricting truck size for environmental and safety reasons, preventing monopolies, and regulating the flow of certain goods through tariff structures. However, to optimize a sea-air hub, the road links between the airport and seaport should be free of restrictions. When there is minimal government intervention in the rate structure and the free interplay of supply and demand is the single rate-determining factor, foreign capital flow and the free flow of goods are likely to be a result. 8 With containerization, the widebody aircraft, and rapidly improving technology, sea- air hubbing activities have also evolved to include new logistics concepts performed by manufacturing firms, freight forwarders, and airlines.

The air-land multi-modal industry used to be dominated by forwarders and NVOCCs (Non-Vessel Operating Common Carriers), but it has since been penetrated by the airlines. Airlines have not, however, been able to penetrate the sea-air industry, which remains dominated by FLPs and NVOCCs. Nevertheless, increases in sea-air freight are an important factor in the development of the air cargo industry. In Chapter 14, we will examine the success of the sea-air hub in the United Arab Emirates, which links sea freight from Asia with airfreight to Europe, North America, Africa, and other destinations.

For as long as long-distance trade has existed, intermediaries have been involved in the business. Wherever trade flourished, merchants saw shipping agents and customs brokers as important partners in their attempts to import, export and ship goods to faraway places. Transport was a primitive business then; goods traversed varied and often inhospitable terrain. Transporters also had to contend with unpredictable weather, unhelpful border officials, and unhappy consignees who probably had to wait long periods of time for their precious cargo to arrive, never sure if it would be in a condition fit for distribution and sale. We have progressed since then, though the unpredictability of the weather and the men in uniform at the borders remains unchanged. And while FLPs have attained a considerable degree of sophistication as their functions have multiplied, their role as intermediaries has remained unchanged in many parts of the world.

The extent of the FLP’s contribution to the trade process is largely dependent upon the contribution of those who make up the other links in the chain. Just as good road networks make trucking easier, and just as long runways facilitate larger airborne freighters, a container terminal must operate efficiently. Its prestige lies in how quickly goods move from the quay out through the gate. The same is true for airports. The bottom line is that for an FLP, a terminal is only as good as the vision and efficiency of its customs and security authorities. Of course, we need customs and security authorities, because they protect countries from being flooded with substandard and unwanted goods. They protect manufacturers from devious opportunists who spray markets with gray goods. They are key players in the war on the import/export of illegal merchandise. They are the necessary policemen of the flow of global trade. However, when they create bulky bureaucracy, they impede the trade process instead of facilitating it. And from the way goods are handled in some regions today, one would think seaports were simply storage areas, not transfer points. Too much bureaucracy exists within customs bureaus and transport security authorities in many countries today. As a result, instead of goods moving on- and off-board vessels swiftly, precious time is spent processing sometimes perplexingly unnecessary paperwork. In Chapter 14, we will look at some examples of this problem.

A terminal may boast state-of-the-art facilities, ultra-modern gantries, large berths for ships, and numerous aircraft terminals. It may be full of experts in every aspect of port management. However, if it contains customs and security officials who create a mountain of paperwork out of complicated procedures, multiple tariffs, and unnecessary delays, then a quick turnaround time will be out of the question. In addition, if you have customs officials who amend regulations and procedures midstream by simply pasting a paper on a notice board, you may as well forget about timely deliveries. You may as well forget about freight management, and start working on paper management instead. The solution to these obstacles lies partly in the paperless procedures that some customs bureaus are beginning to adopt. But in general, the successful logistics hub— and its affiliated regulatory authorities—will be one that fosters a culture of efficiency and works its hardest to satisfy customers by carefully and intentionally facilitating its own share of global trade.

1 Branch, Elements of Shipping, 532.

2 Ibid., 398-400.

3 Ibid., 424.

4 Ibid., 420-421.

5 Ibid., 418-420.

6 Raguraman, “International air cargo hubbing: the case of Singapore,” 57.

7 Al-Hajri, The Impact of Sea-air Mode on Air Cargo Transport, 158.

8 Ibid., 151-152.

CHAPTER 12

THE CHANGING ROLE OF

THE FREIGHT FORWARDER

The problem of supply and demand is the driving force of human history, and it is directly related to transport: if we cannot produce the food or goods we want to consume or use, they must be transported to us. In the age of trade between farms and villages, this transport was relatively simple, if slow, and performed with animals and wagons or only with manpower. However, as people began exploring other trading opportunities, cross-country and cross-continental travel began to spread. With exploration and the birth of global maritime trade came the growth of merchant shipping and long-distance transport by sea (Chapter 4). The Industrial Revolution of the eighteenth and nineteenth centuries applied steam power to transport, ultimately facilitating even faster movement of goods (Chapter 4). Today, the products we consume travel long distances along global supply chains to reach us. Production, inventory control, transport, and distribution, and specialized handling and management are all part of the process. As supply chains become more geographically intricate, their success depends more and more on the expertise of competent transport intermediaries (freight forwarders, or freight logistics providers).

Levying customs duties by government agencies has been a basic component of commodity production and trade throughout history. With the collection of customs duties came demand for middlemen and agents who would move goods on behalf of the shipper or consignee. Customs brokers and agents who acted on behalf of shippers to arrange freight transport and buy space on ships evolved into freight forwarders. The role of the freight forwarder has further expanded, and they have long-abandoned the perception of being mere agents for the transport industry. Today’s freight logistics providers (FLPs) are responsible for an entire array of services in the supply chain. This chapter examines the changing role of freight forwarders, the importance of their services to the functioning of global supply chains, and some of the tools they can use to add value to these supply chains.

The Forwarder’s Role in Global Supply Chains

Careful supply chain management is necessary to optimize the various elements of the supply chain for speed, flexibility, efficiency, cost, and customer service. A company is measured not by how good its product is, but by how good its supply chain is. The customer’s primary question used to be “how much?” Now it is “how fast?” The ability to respond to such changing customer demands in a volatile environment hinges on visibility over the entire supply chain. 1 The concept of visibility was important to the success of every project presented in Part I, and today it has strategic implications in that it sustains, accelerates, and enables the other supply chain drivers. Without true visibility, a company will likely see diminished effectiveness and efficiency. 2

Supply chains involve many groups of trading partners, and logistics is the key to holding them together. Logistics is defined as the process of planning, implementing, and controlling the efficient flow and storage of goods and their related information. As global logistics become more demanding, and as the savings available through supply chain efficiency become more attractive, the outsourcing of procurement, distribution, and return logistics has become a common practice. The high-tech industry, for example, is experiencing shorter product life cycles with almost every quarter. No sooner does an existing model hit the shelf than a more advanced version is ready to replace all existing stock. Increased competition to be the first one in the market with the latest model has put greater pressure on the supply chain.

There are numerous factors that companies take into consideration when outsourcing and planning their supply chain activities. First, if a firm independently manages its own logistics, it has to divert attention from its core competencies and strengths. However, if the firm outsources some functions, such as warehousing, inventory management, and distribution, it is better equipped to focus on other tasks. It also benefits from having its goods handled, stored, and delivered professionally. Second, when entering the market in a new geographic area, it is unlikely that a firm will be aware of the intricate details of business management within that region. These include local documentation and procedures that require local expertise. For a firm to manage these activities from thousands of miles away would prove extremely taxing, and would require continuous updates of activities and IT support. Outsourcing logistics activities gives firms a global reach and helps them take advantage of external market opportunities immediately.

FLPs can undertake various logistics tasks in the supply chain and in doing so add value to the product.These tasks usually include the freight forwarder’s traditional customs clearing and forwarding work, as well as services such as warehousing, distribution, inventory management, co-packing, labeling, repacking, weighing, and quality control. By providing these services, the FLP plays an essential role in domestic and international supply chains. Firms can outsource these tasks to the FLP, saving money and limiting geographic constrictions. The FLP can benefit the firm by reducing turnaround and transport times.

In order to survive, FLPs must provide value-added services that comprise a significant portion of the customer’s total logistics costs. Quality, value-added service is based on consistently providing customers with ever-improving solutions to their supply chain needs. And supply chain participation is not an option for FLPs—it has become absolutely necessary in an age when there is such limited value in simply facilitating the customs clearance process. Moving freight between supplier and consumer is not enough. It is entirely possible that, in some parts of the world, the freight forwarder as we knew him will be extinct in five to seven years. To survive, the freight forwarder must integrate his services into the entire supply chain system, making his expertise part of an integrated whole.

The small forwarder who has not yet discovered a way to add value to the supply chain will be threatened by the entry of other competitors into the market. As major logistics providers, shipping lines and forwarders merge, fewer and fewer customers need a pure forwarder whose capacity is limited to clearing and forwarding tasks. While the freight forwarder is evolving into an FLP who provides value-added services, banks, shipping lines, trucking companies, terminal operators, and consultants are adding logistics services and freight forwarding to their lists of services provided. The primitive forwarder will not be able to compete with these flexible FLPs unless he actively integrates himself into a supply chain.

The difference between a primitive freight forwarder and an FLP is the value added services they provide. Freight logistics providers must be flexible and able to provide a variety of services based on the customer’s demand, and FLPs in different regions are seeing different trends in service offerings. Third-party logistics (3PL) services in Western Europe and Asia Pacific tend to be more integrated than 3PL services in North America. 3 Europe is home to a plethora of 3PLs, and forwarders there are more aware of their changing role than forwarders in other regions. While forwarders in developing countries may, out of necessity, be more concerned with transport infrastructure and trade bottlenecks than with supply chain integration, the forward-thinking ones recognize its future importance. As regulations change and more countries join the World Trade Organization, more opportunities are created for major multinationals to enter markets that were formerly closed. When we examine the forwarder’s situation in a few specific countries, we will see that while there may always be a market for the small forwarder, it will most likely shrink. (Chapter 14) Every company, from small grocery store chains to multinationals like Nike, has learned that inventory management and distribution are the keys to improving supply chain performance, increasing value for the customer, and lowering total logistics costs. An FLP, by definition, manages inventory in transit and at rest; he can therefore undertake a variety of supply chain applications and inventory management options, such as those shown in Figure 12.2.

When we break down these four service categories, we will see that there are a number of logistics tools at the FLP’s disposal, which can be used to add value to the supply chain. These optimization tools include distribution, warehousing, vendor-managed inventory, supply management, postponement, and ancillary services such as labeling, weighing, quality control, co-packing, and repacking. Whatever tools he uses, the FLP must, more than ever before, be familiar with the intricacies of his customers’ products.

The FLP must also be capable of providing just-in-time services (JIT), because volatility of demand continues to be a major challenge facing supply chains. In a just-in-time system, inventory is kept at a minimum in small lots, and products are supplied on demand rather than stocked in large quantities. The advantages of this system include capital reduction, plant throughput, quality assurance, and market responsiveness.

Value-added services such as distribution and packing are self- explanatory. Following are two unique tools that a freight logistics provider can use to add value to his customer’s supply chain.

Vendor-managed Inventory (VMI)

The Vendor-managed Inventory system (VMI) gives the supplier (vendor) the responsibility and authority to manage the entire replenishment process. He monitors the buyer’s inventory levels, makes re-supply decisions, and initiates transactions that would previously have been completed by the buyer. The relationship between Wal-Mart (a leading US consumer products retailer) and its suppliers is a good example of VMI. Suppliers such as Procter & Gamble and Johnson & Johnson have agreements with Wal-Mart to maintain and replenish their product inventory at Wal-Mart stores. Wal-Mart in turn gives control of replenishment timing and quantities to these suppliers. It also shares electronic point- of-sale data with suppliers so that they always have up-to-date information about customer demand. With the Internet, this kind of cross-supply chain information sharing takes place seamlessly and efficiently. For a 3PL to undertake VMI in its truest sense, he would have to become the owner of the inventory. Instead of owning it, the 3PL usually manages the inventory on behalf of its owner/vendor.

It is sometimes better for inventory to be managed at or nearby a manufacturer’s facility. In these cases, a third party (often a 3PL) sets up a supply hub on or near the manufacturer’s site where it warehouses and manages the inventory that is needed for production and distribution. In this way, the 3PL has a ready stock of parts for the manufacturer, and neither the 3PL nor the manufacturer has to rely on extensive transport networks for delivery. The 3PL may provide other value added services, such as procurement, purchase order management, invoicing of supplier goods, and transport to and from the supply hub.

Postponement Logistics

Postponement provides manufacturers with a cost effective method of mass customizing a product. The idea is to maintain the product in a neutral or non-committed state, delaying its differentiation to the last possible moment. Postponement saves customers money and adds value to the supply chain by eliminating obsolete inventory and making the product to the customer’s specifications more easily. The task of differentiation can be outsourced to an FLP, who also, by definition, carries out traditional freight forwarding and customs brokerage tasks.

If the supply chain stretches long distance, as most supply chains do, it makes sense to outsource customization to an FLP who can handle distribution as well. For example, an FLP might take on the job of placing corporate logos onto hair dryers for hotel chains. At the last minute, the hairdryers may be customized for a specific hotel chain from a supply of neutral units held in a bonded warehouse. The FLP would then be responsible for transporting the hairdryers to the hotel locations. Alternatively, an FLP might customize computers for a specific country by adding the appropriate electrical plugs at its warehouse, and then provide distribution services to retailers throughout the country. An FLP might also apply country-specific product ingredient labels on imported food products.

Leveraging IT to Manage Transport Logistics

Information technology is one of the most powerful enablers that the FLP has at his disposal, and it is rapidly changing the way he operates. Each evolutionary step in technology, from the telephone, to the fax, and now the Internet, has had a major impact not just on the way the FLP conducts his business, but the role of the FLP itself. Armed with real-time communication and information sharing capabilities, inventory status, goods efficiency reports, and track- and-trace capabilities, the e-competent FLP can now approach his customer with a reservoir of services and options that let him blend the virtual world with the physical one.

Technology was first introduced to business as a way of automating clerical functions. However, in order for a company to enhance its competitiveness, its IT utilization must evolve from mere information processing to the automation and improvement of the physical aspects of supply chain activities. 4 IT is no longer a support service, but an integral part of operations that allows for greater flexibility, speed, and efficiency. It has become a seamless, lightweight replacement for bulky paper operations, from the submission of customs documentation to booking space on a ship or airplane.

The foundation of the technology used in today’s trade and transport networks is Electronic Data Interchange (EDI), which refers to the systems that allow computers to conduct business transactions over telecommunications networks. The development of EDI systems around the world began in the mid-1980s. The result was faster communications, allowing for better control of the information flow, a decrease in the volume of paper, and reduced costs. The international trading community thus obtained higher service levels, gains in efficiency, and improved partner and client relations. EDI is especially useful in streamlining customs procedures. Developing economies must adapt to internationally accepted trading practices and EDI can help them do so. It simplifies documentation procedures and harmonizes processes across various regions, two challenges which developing countries must meet if they want to streamline import, export, and transit processes and compete on a global level.

While EDI has revolutionized global trade, there are specific applications that can do more than simply connect two like computers over a telecommunications network. Supply chain management (SCM) software can carry out functions such as forecasting, order fulfillment, demand planning, network planning, warehouse management, and transport management. SCM software which optimizes transport involves automating tasks such as routing, scheduling, load planning, consolidation, carrier selection, import, export, and track and trace. One important tool for track and trace is Radio Frequency Identification, or RFID (see Figure 12.3).

SCM applications have a few capabilities in common. The information must be accessible to a user anywhere in the world, it must be accurate, it must be flexible, it must be visible, and it must be fast. With the help of SCM software, supply chain managers can achieve inventory efficiency; faster information flow; more accurate determinations of when and how much material/capacity must be purchased, produced, or moved; careful monitoring of events and inventory within and outside the enterprise; and electronic enterprise linkage, which replaces manual linkage. 5 These systems can help companies integrate similar functions spread over different areas and curtail unnecessary activities, enhancing their ability to cope with customer needs and meet product quality standards. 6 The use of SCM applications varies in different parts of the world. In 2003, North America’s top five 3PL-centric information technologies were applications for:

• warehouse management

• shipment tracking and trace/event management

• export/import/forwarding/customs clearance

• web-enabled communications

• transport management

In Western Europe the top five uses of information technology were applications for:

• warehouse management

• export/import/forwarding/customs clearance

• transport management

• shipment tracking and trace/event management

• web-enabled communications

In the Asia Pacific region, the top technologies used were for transport management and export/import/forwarding/customs clearance. 7 The best SCM applications are RFID-ready and can synchronize all of these functions with customer orders.

Technology is essential for supply chain integration, but internal upgrades in logistics processes must precede external integration with suppliers and customers. 8 When firms upgrade internally and externally by introducing information technology to the supply chain, they see notable results: better efficiency and flexibility, the ability to identify optimal inventory levels (and thus increased inventory turnover), a reduction in warehouse space, higher quality products, enhanced productivity, reduced delivery times and costs, enhanced competitiveness, and positioning for further growth. For these to occur, though, it is necessary to establish a total supply chain network with an integrated database (Supply Chain Enterprise Portal) capable of supporting each function. 9 IT, when applied to customs formalities, facilitates the import process by standardizing inspection and evaluation procedures. Some ports and customs bureaus remain stuck in the paper age, while many others are moving toward paperless systems. A number of nations have undertaken customs modernization programs to achieve paperless trade, a practice which has been encouraged by international organizations such as theWorld Customs Organization and the United Nations Conference on Trade and Development (UNCTAD). Paperless documentation submissions are also an excellent way to safeguard against corruption in the system. However in order for paperless trade to fully develop, e-commerce must become fully legitimate and be recognized by governments. An important first step in this process is for governments to recognize the legality of the e-signature. This will be discussed further in Chapter 17.

IT offers myriad opportunities for the freight logistics industry; FLPs who ignore its many offerings are not likely to survive. However, while the virtual world may be shrinking and becoming accessible to anyone with a website, the distance of 9,585 kilometers from London to Tokyo remains constant. We cannot yet beam goods to another location electronically. Thus, while physical operations are the less glamorous side of e-commerce, they remain the fundamental element of the process. As we discussed in Chapter 10, this was one of the most important lessons learned during the dot-com boom and bust.

IT is a seemingly invincible weapon and it gives some people great confidence. However, it is only a tool, a catalyst (though an immensely powerful tool). Ultimately the onus lies upon people, not on technology, to make business more efficient. Without requisite professionalism, plus a basic knowledge of equipment handling, new international conventions, and ever-changing regulations, the FLP is walking on a virtual minefield—whether or not he has the latest SCM applications at his side. Logistics today is essentially the efficient management and handling of information at all points in the supply chain. Real time, accurate and customized data communication is paramount to the entire business, and it is the successful management of this information that sets the winning FLP apart.

1 Ross, Manrodt, and Holcomb, “Operations Excellence: the Transition from Tactical to Adaptive Supply Chains,” 9.

2 Ibid., 4.

3 Langley, Allen, and Colombo, “Third-Party Logistics: Results and Findings of the 2003 Eighth Annual Study,” 10.

4 Narasimhan and Kim, “Information System Utilization Strategy for Supply Chain Integration,” 53.

5 Peterson, “Supply Chain Management: Evolving Beyond Linear Interactions,” 1.

6 Narasimhan and Kim, “Information System Utilization Strategy for Supply Chain Integration,” 52.

7 Langley, Allen, and Colombo, “Third-Party Logistics: Results and Findings of the 2003 Eighth Annual Study,” 13.

8 Narasimhan and Kim, “Information System Utilization Strategy for Supply Chain Integration,” 54.

9 Ibid., 51.

CHAPTER 13

SECURING GLOBAL TRADE LANES:

PREVENTING THE TOOLS OF TRADE AND TRANSPORT

FROM BECOMING THE TOOLS OF TERROR

In September 2001, terrorists hijacked four airplanes and used them to kill approximately 3,000 people. In September 2003, a man shipped himself from NewYork to Texas in a crate, in collusion with the shipping company’s employees. In September 2004, a cardboard roll filled with a flammable substance believed to be thermite was found in a jet’s cargo hold at Sydney Airport. While these security breaches vary in their gravity, they all demonstrate that there are serious holes in our transport networks. Governments around the world have therefore acknowledged that all modes of passenger and cargo transport are potential terrorist targets. The cargo security regulations that have been developed in response to these threats are still evolving, and in the past few years, the international trading community has had to learn a list of new acronyms like CSI (Container Security Initiative), ISPS (International Ship and Port Facility Security Code), AMS (Automated Manifest System), ACI (Advance Commercial Information), and C-TPAT (Customs-Trade Partnership Against Terrorism). Because these regulations mean more work, time, and costs for each company in the supply chain, their implementation has been met with industry grumbling. The government agencies that introduce and reinforce these rules are likewise faced with more work and an increased cost burden.

It is clear that cargo security is costly and time consuming. It requires steps like extra screening, new record-keeping processes, background inspections, investment in new technology, and the re-training of staff. However, while it is controversial, and while its finer points have been subject to heated debate in government and industry circles, cargo security has clearly become an undisputed part of international trade. With this fact established, we then face the task of dividing responsibility between the public and private sectors. Cargo security can be broadly divided into three categories: corporate security, cargo theft, and anti-terror. As we will see, it makes sense to leave the latter to the government agencies that are best equipped to confront the terrorist threat, and to leave corporate security issues to private companies—the daily practitioners who own assets and manage transport. In this chapter, instead of focusing on the details of new regulations, we will look at the bigger picture: the monumental task of linking the movement of goods and the movement of information in order to ensure the security of global trade lane. We will examine some specific challenges facing freight logistics providers as well as governments and regulatory bodies.

Recommendations for Freight Logistics Providers

Many freight logistics providers do not yet understand their role in keeping freight secure. They have not yet been convinced 1) that supply chain security should be their primary responsibility, not the government’s, and 2) that they need to saturate their business environments with security measures. When the private sector understands these two concepts, it will be more likely to make the necessary investments in security measures. Even if private sector companies are not convinced of the threat to their individual companies, they can still be convinced of the importance of making investments to secure the supply chain.

There are two helpful ways of looking at cargo security in the private supply chain. First, it can be thought of as a value addition. Freight logistics providers know that in today’s global economy they must add more to their customers’ supply chains than the limited value found in basic clearing and forwarding tasks. The FLP must recognize that comprehensive cargo security measures are value additions in themselves, which, when properly engineered, will increase customer confidence. FLPs decide how much value they are capable of adding to a supply chain in the form of services such as warehousing, packing, quality control, inventory management, or distribution. However, in the case of security value additions, there are no options: it is imperative for the FLP to embrace security measures as a means to improving customer service. Second, creating a culture of security must become a corporate objective. Not too long ago we were concerned with ensuring quality standards, and quality became a culture in business. Now that ensuring cargo’s integrity and security is a mandate, not an option, it is time to create a culture of security in the freight forwarding profession—and you do not have to be registered with the United States’ C-TPAT program to do so. FLPs should recognize that implementing standard security steps throughout their business practices will make them stronger forwarders, add value to their service offerings, and prepare them for the day when these steps are required of all supply chain participants. In fact, the need for a culture of security applies to all supply chain stakeholders, who must ensure that it pervades their organizations from top to bottom so that all members are committed to the common goal of product security and integrity.

What are these standard security steps? How can freight logistics providers help secure the supply chain? There are a growing number of high-tech tools available for cargo security assurance, such as electronic container seals, tracking devices, radiation detection pagers, and x-ray and gamma ray scanning. Tracking systems such as RFID, GPS, and bar coding increase visibility in the supply chain and can therefore aid in the global tracking and identification of certain cargoes and containers. However, beyond these tools, there are some basic, low-tech steps that companies should take to create and maintain this culture of security.

• Assess personnel: do background checks on prospective hires; make sure employees wear IDs; educate and train staff.

• Assess real estate: check all buildings and physical security measures across all branches; control access to facilities by installing entrance gates and identifying visitors.

• Assess security in the procurement process: gather information on the security measures taken by suppliers in order to identify weaknesses/gaps and find solutions.

• Assess the security of IT systems. • Assess security in conveyance.

• Ensure accurate descriptions of cargo and accurate identification of all parties involved in transactions.

• Review supply chain practices to ensure that lead times are sufficient to cope with earlier document submission cut-offs.

These are basic steps, but together they help monitor all the processes and events in the supply chain and increase visibility. Companies that undertake this self-evaluation process will discover what security gaps they have and how to close them.All departments will better understand their role in keeping freight secure, and companies as a whole will be better prepared for the day when these measures are required of them by a regulatory agency. Finally, FLPs can be involved in the fight against terrorism by advising those who are on the legislative side of the battle. As practitioners, FLPs are well positioned to advise the lawmakers and government agencies that are creating and fine tuning new policies and legislation. This assistance can be provided through the industry organizations and associations that help lawmakers navigate the complex world of international trade.

Recommendations for Government and Regulatory Bodies

It is clear that security should first be the concern of the private sector. However, because global supply chains also cross publicly controlled transport infrastructure, and because cargo has been recognized as a threat to national security, governments also play a major role securing trade lanes. The tasks of government are to identify the terrorist threat, set standards, certify known shippers and regulated agents, create incentives for participation in such programs, and convince the private sector of the importance of securing their supply chains. In undertaking these tasks they must balance trade facilitation with cargo security and ensure that trade can flow smoothly even when it becomes more closely monitored.

Governmental development of new transport security measures began in the United States after the events of September 11, 2001. An entirely new agency called the Department of Homeland Security was created, incorporating the various departments that would ultimately oversee transport and border security.The freight industry’s initial fears were that these new regulations would make their jobs more complicated, increase costs, and create bottlenecks. For example, some legislators went so far as to propose that 100 percent of incoming cargo be screened. Since then, much has been written and discussed about the need for the US government to keep business interests in mind when fashioning regulations governing the security of trade and transport.

However, this is not just a North American issue. Other countries and regions followed the United States, implementing their own sets of security regulations for passenger and cargo transport. The prospect of every country, region, or trade bloc developing its own regulations is frightening, especially for the future of transit trade. Will there be one set of standards for the United States, one for the United Kingdom, one for the European Union, one for Japan, and one for Australia? Will one country’s rules take precedence? The development of regulations has been slow enough that, so far, the situation has not gone out of control. However, it is clear that international standardization in cargo security will become absolutely necessary. Just as container size, customs classifications, and Incoterms have been standardized to facilitate international trade, so global standards for cargo security must be implemented.

There are potential threats to cargo at every point along the supply chain, and because most cargo moves through different countries on its journey from manufacturer to consumer, the task of keeping it safe cannot be left to one government. Likewise the task of developing standards for cargo security should not be left to a country acting unilaterally. Eventually, we will need a regulatory body in the tradition of the International Organization for Standardization (ISO) to develop an auditing and certification program. This body will harmonize security measures on a global level.

The major challenge facing international standardization is drawing up minimum standards when there are vast differences in the technological capabilities of different countries. Is it feasible for the Brest airport in Belarus to operate with the same security technology as the Los Angeles airport? While IT does not necessarily make security operations watertight, it is a prerequisite for harmonization, and as such, it must be utilized in developed and developing countries alike. As new security regulations are fashioned, developed countries must take into account the limitations of under-developed countries: a lack of IT systems, poor infrastructure and facilities, and prohibitive bureaucracy. Unless these limitations are addressed and corrected, they will hinder the ability of poor countries to comply with new ordinances and will put other countries at risk. If we want global cooperation, then developed countries with the resources to do so must work through initiatives such as education programs, grants, and technical assistance for specific regions. Putting US Customs officers in overseas ports was a step in the right direction, because it fosters international cooperation and encourages modernization and standardization in other countries. New security regulations must be sustainable and replicable in various parts of the world, or else their development will be in vain.

All supply chain players will have to comply with a harmonized accreditation process in order to participate in domestic and international trade. A good model is the United Kingdom’s aviation security program, in which shippers and forwarders are audited and accredited by the Department for Transport. This accreditation process is a voluntary cooperative effort which makes the shipper a “known exporter” and the forwarder a “regulated agent.” The forwarder who elects to remain unregulated cannot accept cargo from a known exporter unless the cargo is treated as unknown cargo (subject to inspection). The advantage of a partnership between a regulated agent and a known exporter is that their consignments are classified as known cargo and therefore require no security screening prior to uplift, while all unknown cargo requires pre- flight x-ray screening.

The UK aviation screening program also sheds light on the question of whether compliance with such accreditation schemes should be voluntary or mandatory. If accreditation provides real benefits, such as faster cargo throughput and secure supply chain links, then shippers and forwarders will have the incentive to participate. Ultimately, such an accreditation process should extend to all supply chain players, from manufacturers and their suppliers to transport operators and infrastructure owners—with the government making the benefits of compliance clear to all of them. Governments will have to convince the private sector not necessarily of the nature and probability of any terrorist threat, but that participation in such programs will strengthen their businesses as well as the entire supply chain.

In addition to the intra-governmental cooperation that will be needed to establish global security standards, we also need cooperation that crosses the public-private divide. This public- private cooperation plays out on a daily basis in the process of risk determination. Freight transactions typically generate a tremendous amount of data. This information, when collected and analyzed, can provide a detailed picture of the background and context of a shipment (i.e. shipper, insurer, port of transit, port of origin, etc.), and it is a much more efficient defense than actually opening containers for physical inspection. The data can be collected electronically, before the container even departs from its origin point, and used to decide whether a shipment warrants closer inspection. In this way, each country can create a “virtual border,” in which ports are the last line of defense, not the first. 1 Because they can provide governments with this essential background information on cargo, forwarders play a primary role in securing trade lanes.

This information-sharing and cooperation is a good example of the public-private dialogue that must take place to an even greater degree if we are to closely monitor imports while ensuring that the pace of trade is not slowed. An important first step in this process is for governments to recognize that freight logistics providers can provide a wealth of helpful data on shipments and therefore play a central role in ensuring safe and secure trade.What more can freight logistics providers do to keep freight secure? They must embrace security measures not just to comply with regulations, but also as a means of improving customer service and adding value to their customers’ supply chains. A new culture of security must permeate the supply chain, so that a commitment to product safety and integrity is part of the mission and vision of every participating business.

What is the role of lawmakers in facilitating trade? First, if they wish to keep global supply chains in motion, they must balance trade interests with the protection of their homelands. Second, international standards for cargo security must be developed and implemented. We will need a regulatory body in the tradition of the ISO to develop an auditing and certification program. Third, over time, technologically poor developing countries will have to be brought up to these international standards in order to ensure that there are no gaps in the chain.

Too many individuals on both sides of the debate have, for the past few years, set up the situation as a public versus private battle. However, free-flowing, closely monitored trade will only be possible when we stop looking at the situation as us-versus-them. Cargo security requires much higher levels of public-private cooperation than we have seen so far. World governments and regulatory agencies may not be able to convince the private sector that there is a probable threat to their individual companies. But with properly- engineered security accreditation programs (which will eventually exist on a global level) the private sector will be empowered to take responsibility for the security of its livelihood—its supply chains—and governments will be free to concentrate on utilizing information and intelligence to counter the terrorist threat.

1 Quartel, “What’s in the box? It doesn’t matter,” 38.

CHAPTER 14

REGIONAL CHALLENGES IN

TRADE AND TRANSPORT

Logistical efficiency in any part of the world depends on a number of factors. Transport infrastructure, legal framework, and cross-border trade channels (i.e. customs) help form the building blocks of international trade. When these function optimally, supply chains can also be optimized. However, when these building blocks become stumbling blocks, supply chains suffer and freight forwarders are not able to add value to their customers’ supply chains. As we will see, when a nation’s freight forwarders and logistics providers battle problems ranging from corruption to bad roads on a daily basis, they miss out on the true goal of the services they provide: adding value to their customers’ supply chains. Given these concerns, a discussion of logistics management as it is practiced today hinges on an evaluation of the varied environments in which freight logistics providers must work.

In this chapter, we will take a closer look at the trade logistics systems of India, China, South Africa, Egypt, and the Emirate of Dubai (in the United Arab Emirates). I have chosen these regions because they provide an informative sampling of best and worst practices in nations with different levels of economic development. For each country, we will examine the economic climate, transport infrastructure, and specific areas of friction in the trade logistics system. Finally, I will offer some prescriptions for change. I define a logistics chain as the entire network of interconnected public and private entities responsible for moving shipments from point of production to points of sale and consumption. The manner in which these entities operate creates a climate for the cross- border and domestic movement of commercial goods, which can either encourage or discourage trade and global competitiveness.

A healthy, efficient trade logistics chain needs a modern transport infrastructure, competitive carriers, competent freight logistics providers, smooth cross-border procedures, customer-oriented banking and insurance sectors, modern information and communication technologies, a sound legal framework, good macroeconomic management, stable and transparent governments, a defined tax system, trade incentive schemes (such as free trade zones), simplified documentation procedures, and proficient exporters and importers.

Unhealthy and inefficient trade logistics systems, on the other hand, are characterized by problems in some or all of the above areas. These problems are exacerbated in landlocked countries, where lengthy border procedures and complicated documentation processes drive up the costs of the transit trade that is so vital to the export competitiveness of landlocked countries. Many of these problems are due to excessive government involvement in the trade logistics chain. However, this does not mean that we can prescribe a purely hands-off approach to trade, for in the case of Dubai, the government’s hands-on approach has worked very well. An inefficient trade logistics system has numerous negative manifestations. Trade will be slow; foreign companies will be less likely to invest; export competitiveness will be low; order-to- delivery cycle times will be lengthened; deadweight costs will be high. In short, an economy will be held back from competing on a global level.

Measuring the cost and impact of logistics and distribution is key to gauging the health of an economy. As we examine the trade logistics climates of Egypt, China, India, South Africa, and Dubai, we will see how these systemic problems hinder trade and, ultimately, economic development. For each country, we will ask the following questions:

• Does the transport logistics infrastructure support supply chain efficiency?

• How widespread is the use of information and communication technology in the computerization of manual processes and in supply chain and warehouse management?

• Are paperless customs procedures practiced?

• Is there excessive administrative intervention in the customs clearance process?

• Does the policy environment support supply chain efficiency?

• How transparent and accessible are the rules and regulations governing trade and transport?

By addressing these questions we will get a broad view of the environments in which freight logistics providers operate: the daily hurdles they face, the bottlenecks that slow trade, the economic outlook for some developing countries, and the best practices that will keep goods moving smoothly and businesses working efficiently. Readers should ask themselves where their own countries fit into this barometer, for in many countries there is a great need for members of the freight industry to partner with their national associations to lobby their governments and tackle these problems on a legislative level.

EGYPT

The land of the Pharaohs has changed in profound ways since they erected the Pyramids overlooking the Nile thousands of years ago. The post-Colonial era has seen Egypt struggle with economic challenges, as well as overpopulation, urbanization, and regional geopolitical problems. Successful competition in international and domestic markets requires low cost, high quality products, both of which the country has traditionally lacked. 1 What is more, regional violence and political unrest can hinder trade. This is demonstrated by the increasing war risk insurance for airlines and shipping lines. However, the past 15 years have seen some improvements in Egypt’s trade environment. Import licensing was eliminated in 1993. In 1998, the government liberalized the shipping industry and ended its monopolies in shipping, stevedoring, bonded warehousing, marine works, ship chandlery, ship repair, and container terminal operations. While reforms have not been implemented across the board, this liberalization has been good for Egypt’s freight forwarders: no longer do they have to do business with government shipping agents, a group notorious for delays, charges for services not rendered, misinformation, extra burdens on vessel owners, and generally poor service. Before 1998, it took one to two days just to obtain a delivery order from an agent. Now it takes just 10 minutes. 2

Areas of Friction in the Trade Logistics System 3

Customs Procedures and Bureaucracy

Although the import/export paperwork process has been simplified over the past few years,excessive government intervention remains one of the nation’s most glaring trade impediments. Foreign companies find doing business in Egypt difficult because of red tape, the multiplicity of regulatory agencies, arbitrary decision-making, high market entry transaction costs, an unresponsive commercial court system, and nontransparent procedures and regulations. Authorities do not have to justify their clearance decisions; neither is there any way to appeal the decisions. Overall, the processes used to identify a commodity’s category can be highly subjective. Food imports are especially cumbersome due to mandatory quality control standards, burdensome import license requirements, and non-transparent sanitary and phytosanitary measures. The challenge for Egypt’s customs bureau is aligning local laws and practices with international customs practices.

Policy Environment

In Egyptian law, shipping and cargo agents are defined but the freight forwarder is not.The first step toward a better understanding the forwarder’s role is a clear definition of freight forwarding activities in commercial law.

High Duties on Truck Imports

Truck imports in Egypt require the payment of unusually high customs duties. The majority of trucks are owned by individuals, not trucking companies, and since few Egyptians can afford to pay the high duties on new trucks, the nation’s trucking fleet is aging rapidly.

Transport Infrastructure

Egypt’s lengthy coastline, numerous seaports, and strategic location (not to mention the Suez Canal) position it at the crossroads of intercontinental trade. However, multi-modal transport in Egypt is not well developed, and infrastructural shortcomings create bottlenecks in the flow of goods into, out of, and throughout the country.

• Newer, privately developed ports such as Port Sokhna and East Port Said are completely modern, but older ports, such as the Suez port and the old Port Said, have not yet been upgraded. Problems include high charges, low service quality, delays, and deterioration of installations and equipment. Egypt’s seaports also have an average 28-day turnaround time for containers (except for the new Port Sokhna). 4

• In the last 10 to 15 years, new roads have been built, but older roads are not well maintained. This is problematic for domestic transport, as the majority of Egypt’s inland cargo movement is by truck.

• Though the Nile has historically linked the northern and southern parts of the country and remains a viable option for some inland freight transport, virtually no river transport is used. Inland waterways are inefficient and have fallen into disrepair. Many vessels lack onboard lighting and cannot travel at night, or are unable to travel year-round as the water levels vary according to the old Nile flood season. Only 20 million of the 320 million metric tonnes of goods moved domestically each year are transported this way. 5

• The railway is one of the oldest in the region, and it desperately needs modernization. A more efficient Egyptian railway network could be an important link between Mediterranean seaports, ports near the Suez Canal, and the landlocked countries of north-central Africa.

• EgyptAir’s control of airport operations such as ground handling and catering has meant high-cost, low-quality services.

Recommendations

A system with so many disincentives for trading activity reduces access to the Euro-Mediterranean market, “decreases foreign and domestic investment, reduces product variety and availability, and wastes government resources on duplicative and unnecessary activities.” 6 The lack of transparency and due process increases uncertainty and has a negative impact on imports and investment. For Egypt to modernize its trade logistics system and meet worldwide standards, a number of steps should take place:

• Establish partnerships with private investors to improve infrastructure across the transport chain.

• In order to reduce railway costs and improve efficiency, outsource non-core activities, streamline the organizational structure, and introduce concessions to operate infrastructure and provide rail services.

• Relinquish government control of air transport.

• Ease the regulations that restrict competition from non-Egyptian airlines and charters.

• Enact customs reform that minimizes face-to-face contact between importers and customs officials and encourages EDI to facilitate trade.

• Rehabilitate inland waterways and increase the use of this freight transport mode.

INDIA

India’s importance as an emerging economic power cannot be overstated.With the second largest population in the world, an economy that grew 8.1 percent in 2003-2004, and foreign direct investment (FDI) that amounted to US$4.7 billion in 2003-2004, it is poised to become one of the world’s largest economies in the next twenty years. Its growth has been accelerated by a growing middle class, a strong information technology industry, a low cost, English-speaking work-force, trade liberalization, and growth in imports and exports. It has made great strides toward reducing government involvement and increasing private sector participation in commercial and transport activities. Compared to the decades in which the government protected the economy from any outside competition, this increasing private and international participation is a remarkable achievement. 7 There are also numerous infrastructure improvement projects underway that point to India’s attempts to improve its transport infrastructure:

• Golden Quadrilateral highway and railway project connecting New Delhi, Chennai, Bangalore, and Mumbai (with dedicated rail freight lines)

• Construction of major north/south and east/west highways

• Construction of mega bridges

• Privatization of some airport facilities

• A possible dredging project between India and Sri Lanka to deepen the passage between the two land masses and facilitate India-bound trans-shipments at Cochin, Mumbai, or Chennai, instead of Colombo.

Despite these opportunities, India is still constrained by a number of limitations, not the least of which is its population. The country is held back by a massive bureaucracy, arcane regulations, corruption, and red tape. Inefficient state-owned enterprises drain government resources; their lagging performance is a burden on the budgets of state and central governments. Rigid labor laws, infrastructure weakness, slow administrative processes, and informal payments lengthen transport times and diminish export competitiveness.

Areas of Friction in the Trade Logistics System

Customs

Over the past 40 years, customs legislation has been modernized, and codes and duties have been standardized, with further improvements scheduled for coming years. Electronic trade has been in place for several years, and physical inspections are occurring less and less. Tariffs were reduced from an average of 71 percent in 1993 to an average of 35 percent in 1998. 8 The average tariff is now at about 30 percent. The use of EDI in the customs process is decreasing human involvement and streamlining procedures. As of late 2004, almost 100 percent of airfreight forwarders used EDI, and the top 50 percent of customs house brokers were using it as well. 9

While these developments are commendable, further conceptual changes are necessary. International trade documentation processes are still inefficient, poorly defined, and complex, and therefore reduce transparency and inefficiency in the manufacturing and logistics sector. 10 Often the customs officer, not the invoice, determines an import’s value. This creates a breeding ground for corruption in the form of informal payments and bribery. While corruption in India has been lessened to some degree due to an increased media focus, it remains one of the nation’s most stubborn trade barriers. India’s customs bureaucracy operates under a legacy of bureaucracy, not trade facilitation, and this attitude will only change with the training of a new generation of customs officers.

Transport Infrastructure

Road transport is slowed by accidents, truck breakdowns, police inspection or harassment, drivers stopping to visit home, city truck bans, long lines at borders, and general traffic congestion. 11 Some border transit protocols prohibiting trucks crossing national boundaries even require that cargo be moved from one country’s vehicles to the vehicles of the other country. 12

Air transport still faces some challenges. Widebody planes are not yet the norm, and inefficient government-owned airports have stunted the growth of domestic air cargo (though it is in use for high value, perishable, and express shipments). In addition, the cost of air transport remains very high compared to road transport. However in 2005, Air India expanded its fleet for the first time in 15 years, placing an order with Boeing for twenty-seven 787s, fifteen 737s, and eight 777s. At the 2005 Paris Airshow, India’s young airlines accounted for a large share of the 125 planes ordered.

Delays in claiming shipments at seaports are caused by late notification of ship arrival, as well as the long preparation time needed to assemble customs documents. Port/terminal processing can be further delayed by equipment breakdowns, a lack of cargo handling equipment, and lengthy clearance times. Frequent strikes and other political activity outside the ports can also cause congestion and block port access. 13 New ports are being developed with cooperation from international players such as Dubai Ports International, P&O Ports, Hutchison Port Holdings, and PSA. Increasing rail and road connectivity to ports is an important part of this process.

Indian Railways is plagued by overstaffing, poor maintenance, and a declining market share, due in part to its status as a state-owned enterprise. While many developing countries are recognizing the importance of separating public-service obligations from commercial imperatives in state-owned enterprises, India’s railways still suffer from a lack of transparency and accountability, with poor service and a reputation for unreliability. The necessary restructuring will be a difficult task: with a work force of 1.6 million, the railways are the largest employer in India and perhaps the largest employer in the world.

Legal/Policy environment

The red tape and bureaucracy that characterize Indian customs processes are also a prominent feature of government agencies. Lumbering state-owned enterprises and the huge weight of bureaucracy are a drag on the nation’s economic growth. Attempts at privatization and/or restructuring are met with opposition from labor unions, as they fear the removal of the social safety net for government employees.

Customs house brokers have been recognized by Indian law since 1962, however freight forwarder’s and logistics providers are not. If freight forwarding were also legally defined, it would be subject to rules for arbitration and resolution of disputes. Legal recognition could also mean easier access to financing and the establishment of a regulating body, which would be able to prevent undue legislation from harming growth prospects. Conversely, legal definition could lead to more negative government regulation.

What use is the IT boom to logistics?

As the economies of China and India race ahead, they attract more outsourced work than any other country in the world.Though foreign direct investment in India is only a fraction of what China has seen, its highly successful outsourcing industry employs close to one million people. Compared to China, India tends to receive more complex, IT-related work, such as call centers and data entry. With the help of a strong cultural emphasis on education and funding from joint ventures with Indians living abroad, India has succeeded in establishing an internationally competitive industry that takes advantage of its highly skilled, low-cost, English-speaking work force. A few regions in India have also become vibrant clusters for IT and software development. “Clustering” is defined as locating a business in or near an area populated by innovative companies that take advantage of advanced physical or telecommunications infrastructure. Clusters are home to similar companies (which cooperate as well as compete), specialized suppliers, service providers, and skilled knowledge workers.

While India’s IT clusters are booming, it is increasingly apparent that logistics and advanced physical infrastructure are necessary for continued success. Multinational companies, for instance, are much more likely to locate in one city or sub region if it offers an efficient regional transport logistics systems. 14 It is possible for some of the limitations of a poor physical logistics infrastructure to be overcome by a superior information infrastructure, 15 and this may be true of India’s IT clusters. However, the imbalance between them cannot last forever: efficient logistics will have to complement technological innovations. 16 If the growth of FDI (in the form of multinationals locating in India) outpaces the development of transport and telecommunications infrastructure, multinationals may go elsewhere for outsourced work. Already, many companies must take costly steps to guarantee communication with their employees (i.e. supplying them all with mobiles and pagers) and to house and transport employees (i.e. building suburban campuses to accommodate employees, tracking vehicle movement through the crowded cities to monitor which employees will be coming late for work, or even running their own transport fleets).

In addition to encouraging upgrades in the physical infrastructure, there are at least three ways in which India’s IT boom can boost to its trade logistics system. First, an IT powerhouse is an ideal place to develop new logistics and supply chain management software. India needs to exploit its IT strength to develop IT-enabled logistics. Second, the government can draw on the country’s IT strength to implement automated trade systems that facilitate trade, transport, and especially the growth of the export market.Third, in a globalized world, governments must maintain a technological framework that allows industry to flourish. India’s strong IT industry puts the country one step ahead, for it establishes the technical framework for the digitalization of other industries.The hope is that the culture of innovation that has been established in the IT industry will spread to other industries and sectors as well.

Recommendations

Increase public-private partnerships, especially in infrastructure sectors that have not been privatized (airports and railway network). Continue using EDI to streamline the customs process.

Improve the capacity and quality of existing physical transport networks:

• Railways: Any increase in rail’s market share will most likely be in low-to-medium value cargo. The railways could also take a larger share of container transport if unit train operations were made available to major multi-modal operators. 17 Three other important steps to increase rail’s market share are gauge harmonization, dedicated rail lines for cargo traffic, and improved cross- border procedures.

• Highways: Widen primary roads and strengthen bridges; continue to award road construction and maintenance contracts to private companies; consider toll roads; improve road connectivity among seaports, cities, and airports.

• Inland waterways: Increase depth and improve navigational aids to allow for night navigation.

• Seaports: If seaports are the gateway for Indian goods to world markets, they must become more efficient. The practice of privatizing seaports, container terminals, and container freight stations has helped make some progress in this area and should continue. Planners should also consider the long term goal of hub ports at either Chennai and Mumbai or Chennai and, supplemented by numerous feeder ports. These two theoretical hub ports could replace Colombo as the major transit point for cargo headed to India, Pakistan, and Bangladesh.

Train a new generation of customs officers who understand their role as trade facilitators first and revenue collectors second. Simplify customs rules, especially for consolidation cargo. This would help India become a regional leader in consolidation/deconsolidation, an activity that could take place at the two hub ports proposed above. Simplifying customs rules would be only one aspect of the larger, holistic goal of enhancing multi-modal transport.

CHINA

In the year 2000 the government of the People’s Republic of China named logistics a key sector in its tenth five-year economic and social development plan, an act that gave public recognition to the importance of logistics for achieving China’s international trade and economic goals. Improvements in logistics processes are often fueled by new trade demands and supply chain flows, demands which China is certainly experiencing. Globalization, new trade agreements (especially accession to the World Trade Organization), and the opening up of the Chinese economy have triggered the relocation of manufacturing to China and therefore have greatly impacted global freight flows. This rapid economic growth, combined with the nation’s political stability, has generated great foreign enthusiasm for business opportunities in China. In addition, global economic changes have led a growing number of companies to outsource manufacturing to the nation’s cheap labor pool.

The evolution of this economic powerhouse is unique in that China only emerged from a command economy 25 years ago. During the period of central economic planning (1950-1978), logistics in its modern sense was nonexistent and infrastructure development between the various provinces was highly uneven. Nineteen seventy-eight saw the beginning of major economic reform, as the government opened China to the world and loosened its control over the economy. In terms of logistics, the government’s new objective was to improve efficiency by allowing market mechanisms to direct materials flow.

More noticeable infrastructure improvements began in 1993, as the government invested in highways, harbors, container terminals, airports, information networks, and logistics hubs, and dismantled state transport monopolies. The government also began to remove red tape, fight corruption, and reduce barriers, ultimately naming logistics a strategic sector for development in 2000. Multinational logistics providers set-up in China, where they invested in IT, modern equipment and facilities, and supply chain management personnel. Concurrently, the country saw an increase in manufacturing, a growing domestic market, industry consolidations, the lowering of import tariffs, and multinational companies demanding a quality operating environment. In 2001 China was finally admitted to the WTO.

Areas of Friction in the Trade Logistics System

In 2002 the following were identified as the major challenges confronting China’s logistics providers: 18

• Policy environment, including highway truck tolls and restrictions on joint ventures

• Inefficient transport and warehousing operations

• Insufficient infrastructure

• Differences between provinces

• Lack of IT application in the general business environment

• Clients’ lack of experience in using 3PLs

• Lack of supply chain coordination

Let’s look at some of these problems in more detail.

Need for Reform in Private Companies and More Logistics Professionals

Overall, China needs to see reform within its companies and integration with international best practices. Much of the nation’s management was trained under a planned economy, and the problems this causes are proof that economic history can negatively affect the way logistics is practiced today. Smaller forwarding companies, many of which are not specialized FLPs, operate based on primitive, top-heavy, and hierarchical organizational structures. There is also a lack of qualified logistics instructors—many teachers are not up-to-date with new technology and knowledge, so domestically trained logistics professionals may not be as well prepared for their work as necessary. 19 Some employers have found it difficult to hire enough qualified employees—they often suffer from a lack of motivation, a lack of problem-solving skills, and the need to be micro-managed.

Customs Processes

The government has inherited a bureaucratic system laden with regulatory authorities that can be difficult to navigate. Customs processes for imports and exports are not standardized. They require many signatures and inspections from excess departments, and employ complicated goods classification structures.

Ambiguity in Highway Tolls

China’s highways fan out in a number of strategic channels, but high tolls cause carriers to overload their trucks. Eighty-one percent of trucks are overloaded, a practice that creates safety problems and wears out the roads. 20 The laws that govern overloading and drivers working overtime are not applied universally, and differences between provinces make these regulations highly ambiguous. Local authorities often add extra charges that increase transport costs. For example, truckers may have to pay more in provinces where they are not registered.

Disjunction Between Directives From the Central Government and Their Implementation by Provincial Governments

One consequence of China’s geographic size and bureaucratic system is that regional governments do not always implement the reforms and liberalization encouraged by the central government. 21 The issue of highway tolls is symptomatic of this larger policy problem.While positive economic directives may come down from the central government, they are often not implemented uniformly across China’s many remote provinces. Logistics providers note that regional differences are one of their biggest challenges. 22

Transport Infrastructure

Three major logistics areas have developed in China: the Yellow River Delta, the Yangtze River Delta, and the Pearl River Delta. Economic development in these three regions has been much faster than in inland regions, and as a result, there are vast differences between urban coastal regions, which are heavily industrial, and the rural inland region.

In addition to high tolls, trucking companies also have to contend with poorly maintained roads. Problems with the highway network are more common in inland areas, and are the greatest barriers to inland trade because transport is carried out mostly through trucking. (Road transport accounted for 62 percent of total transport by logistics providers surveyed in 2002.) 23 The railway is not competitive due to its surcharges, low capacity, low service quality, inefficiency, unreliability, and inability to accept double-stack cars. The government monopolizes rail services, and bottlenecks and delays are common. Rail accounted for only 15 percent of transport by logistics providers surveyed in 2002, 24 and carried 32 percent of China’s freight in 2004. 25

China’s aviation program has evolved since the 1930s and has moved through the phases of centralization, decentralization, competition, expansion, privatization, and consolidation. Foreign participation is increasing, and laws are being drafted allowing private investment to build, buy, and manage some government- owned airports. Chinese airports and airlines need to draw on foreign expertise in management and new technologies if they are to support the trend for just-in-time manufacturing. Demands for time-sensitive deliveries to more hinterland locations will increase competition in the airfreight market.

Information and Communication Technologies

Chinese FLPs are eager to provide track and trace services over the Internet, but this is very expensive. Customers are finding cheaper ways to get updates on their shipment status, such as SMS. Supply chain management software is also costly. In some cases, enterprises implement new systems without understanding them, or build facilities that are not suited to modern logistics practices. 26

Recommendations

China’s massive human capital, cheap labor pool, and improving infrastructure have positioned it as the fastest growing economy in the world. However, the country needs to continue drawing in international expertise, and further training is needed in forwarding and logistics. If China wants to be a true global player, it must open itself to this expertise in addition to trade. It has become clear that new manufacturing and logistics activities by multinational players will force positive change in the logistics climate. Foreign investors, manufacturers, and logistics providers are flocking to China, and they all require modern information and communication systems, seamless logistics and transport infrastructure, easily understood rules and regulations, and navigable government agencies. The pace of internal reform will most likely be slower than the pace of trade liberalization, 27 but change is inevitable.

The government should create more incentives for foreign participation in the rail sector. It needs to be more efficient if it is to support inland agriculture, whose growth depends on long haul rail transport to seaports.The biggest challenge for rail inter-modal transport is the application of information and communication technologies. Connections between rail, truck, and inter-modal terminals must be streamlined.

State-owned enterprises must adjust to their new role in the Chinese economy, even if that means downsizing and relinquishing control over old revenue streams from state-owned transport operations.

Chinese companies need to examine the way they use software in management, as it is currently not being used to its fullest potential. 28 Chinese logistics providers surveyed were found to be dissatisfied with IT use in their country, citing a lack of its application in the general business environment. 29

Opaque and inconsistently enforced regulations lead to confusion and a poor legal infrastructure. To lessen this ambiguity, the central government needs to have the machinery in place to help provincial governments interpret reforms.

SOUTH AFRICA

For much of the late twentieth century, South Africa maintained strained political and economic relations with the world community due to its policy of apartheid.This culminated in economic sanctions in the 1980s and 1990s. Under the apartheid economy, foreign companies cut off international bank loans and withdrew capital. As a result, the country saw a static GDP in the 1980s, decreased formal sector employment, and declining total foreign investment, which fell from 26 percent of the GDP in 1980 to 15 percent in 1994.

Since the end of apartheid, the bleak economic situation has greatly improved. Sanctions were lifted in the early nineties, restoring South African membership in the global economy. The forces of globalization moved quickly, and South African companies were soon exposed to new foreign competition that forced them to improve both products and processes. South Africa is now a middle income emerging market with mature financial, legal, communications, and energy sectors that give it an advantage over its African neighbors. The GDP, which had grown by only 0.9 percent between 1983 and 1993, grew by 2.7 percent from 1993 to 2003. 30

South Africa’s major trading partners include the United Kingdom, United States, Germany, Italy, Saudi Arabia, France, China, and Japan. Auto components to feed the nation’s burgeoning automotive industry are increasingly imported from the United States, Brazil, Japan, Singapore, India, and Australia. In turn, South Africa exports manufactured consumer goods to East and West Africa; fruit, flowers and vegetables to consumer markets in Europe, China, Japan, and Korea; and metals and other commodities to China. South African industries and exporters clearly have much to offer to the outside world; whether they are able to bring their goods to global markets at competitive prices is the focus of this discussion.

Areas of Friction in the Trade Logistics System

South Africa generates approximately 40 percent of the GDP of sub-Saharan Africa. 31 It is a member of both the Southern African Development Community (SADC) and the Southern African Customs Union (SACU), both of which provide opportunities to exercise a leadership role. Not surprisingly, its superior transport infrastructure has made it the gateway to Botswana, Lesotho, Swaziland, Zimbabwe, Zambia, Malawi, eastern Angola, and the Democratic Republic of the Congo. Customs procedures in South Africa’s neighboring countries are not nearly as smooth as those inside South Africa. Its neighbors are also plagued by systemic problems like poor transport and communications infrastructure, which hurt trade from the time cargo is put on the road to the time at which payment must be made. In this respect, South Africa is well equipped to be a regional facilitator.

Despite South Africa’s advanced place among southern African nations, and despite the positive steps that have been taken in the past decade of restored international participation, trade in South Africa is still slowed by a few factors that are worth noting. The main causes of supply chain bottlenecks are a lack of rail capacity and efficiency, port congestion, border post delays, and customs clearance. 32 There are other factors as well, which can have a negative effect on trade and transport.

Union Activity

Union activity is strong in South Africa, and this can hurt the trade flow in two ways. First, frequent strikes disrupt work and can shut down a port for weeks at a time. Second, unions challenge attempts to dismantle, downsize, or privatize large state-owned companies.

Crime

Crime in South Africa can increase costs for all supply chain players. Warehousing operations, for example, must take extra precautions against pilferage by workers. An even greater threat is the presence of armed gangs who specialize in stealing high- value goods like jewelry and cell phones. In September 2001, a cargo agent was shot dead in a failed robbery at Johannesburg International airport. In December 2001, armed robbers escaped from a cargo depot at the airport with US$1.4 million, US$187,000 worth of diamonds, and jewelry worth US$15,000. And in an attempted heist in September 2004, armed robbers stormed police and security personnel, who were escorting a load of gold and diamonds to a waiting freighter. The robbers shot three police officers and escaped from the scene unharmed. Just that month, Airports Company South Africa had announced the installation of 1,200 new surveillance cameras and an $8 million upgrade to fences and access control gates. 33 It is clear that the basic security measures that are sufficient for the protection of goods in many other parts of the world are insufficient in South Africa.

Currency Volatility

South Africa is a net exporter, so the volatility of the rand has a roller coaster effect on exporters and therefore on the forwarders who move their freight. In 2001 the rand reached a high of 13 to the US dollar, later stabilizing at about six to the dollar. One reason for the rand’s volatility is the fact that South Africa’s economy is driven by gold, the price of which is tied to fluctuating oil prices.

State-Owned Transport Enterprises

South Africa’s transport infrastructure is governed largely by Transnet, a state-owned enterprise that runs freight, passenger, and commuter trains; transports petrol and gas; owns and operates ports; and indirectly owns South African Airlines. Freight logistics providers would like to see greater private sector participation in transport operations and service provision. But even if privatization is not the immediate solution, state-owned enterprises should do their best to create commercially minded operations that take advantage of the private sector’s best practices.

HIV/AIDS

Like its neighbors, South Africa continues to be threatened by the AIDS epidemic. In September 2004, the Department of Health estimated that 5.6 million of the country’s 45 million people carried HIV, a 6 percent increase from the 5.3 million recorded in 2002. South Africa has more people living with HIV/AIDS than any other country in the world. Not only has HIV/AIDS depleted the work force by wiping out a large portion of the 25- to 29-year- old segment of the population, but it also decreases the efficiency of that percentage of the work force which is infected but still able to hold a job. The World Health Organization predicts that the HIV/AIDS infection rate may depress South Africa’s GDP by as much as 17% over the next decade. 34

Transport Infrastructure

A 2004 study of the state of logistics in South Africa found that the country spends more on transport than it should: logistics costs are 14.7 percent of GDP, 35 and transport accounts for 75 percent of logistics costs. 36 This phenomenon can be blamed in part on a heavy dependence on road transport. South Africa has 73,506 kilometers (45,674 miles) of highways and 2,032 kilometers (1,262 miles) of expressways, giving it the longest road network of any country in Africa. Railway service is poor and navigable waterways are non- existent, making the highway system the key mode of transport. In fact, three quarters of long-haul tonnage is transported by road, requiring frequent repair, and therefore draining state budgets.

Because transport on these long-haul road corridors is more expensive than inter-modal transport, the country needs to move toward a combination of road, rail, and air transport that gives rail and air a larger modal share than they currently have. The 22,298-kilometer (13,855-mile) railway network is also the largest of any country in Africa, but it is extremely inefficient and is a freight forwarder’s last choice for inland transport. In a recent survey, the lack of adequate rail capacity and efficiency was identified as a main cause of supply chain bottlenecks. 37 (However, the mining sector, which generates almost half of the country’s logistics requirements by weight, uses dedicated rail freight lines for exports.) Tonnage transported by rail has declined by nearly 20 percent over the past decade. In contrast, road transport increased by more than 50 percent over the same period. 38

Recommendations

A 2002 paper noted that South African companies in general have started to realize the importance of supply chain management and the importance of a single coordinated view of the entire supply chain. 39 As their ranks increase, these supply chain-savvy companies increasingly require the services of freight logistics providers who understand and can work within the supply chain paradigm.

In many respects, South African companies are still inward- focused. Many do not understand international business, and believe there is a small and competitive internal market, but that not much opportunity exists for global expansion. Neither do they place enough emphasis on service delivery. 40 In this way, South African companies are imposing sanctions on themselves.

With continued strategic development, South Africa’s emerging air and sea hubs at Durban, LaMercy, and Johannesburg could position themselves to better serve global supply chains. Major improvements will be required, including upgrading the railway, increasing private participation in the transport sector, regional rationalization, and integration in a common regional market.

South Africa should continue working to help its neighbors modernize in terms of trade, infrastructure, and economic development. While important steps have been taken, regional cooperation has not been extensive enough. Regional development should first tackle transport infrastructure, for improvement in this area will have positive effects on trade and export competitiveness. The South African Association of Freight Forwarders can also take a greater role in regional development by encouraging and guiding the development of national freight forwarding associations in neighboring countries.

South Africa’s railway network requires vast improvements if it is ever to take some modal share away from the overburdened roads. The key to this may be the restructuring of Spoornet so that private companies are given the opportunity to compete on the network and in doing so improve service quality. The need for efficient transport networks covers the whole of South Africa’s industrial landscape: the steel, auto, and grain industries, for example, require cost efficient distribution. If they cannot operate at a competitive cost, they will not be able to respond in a reliable and timely fashion to sophisticated first world market demands.

DUBAI

On the northeast coast of the Arabian Peninsula, straddling an inlet of the Arabian Gulf, sits the Emirate of Dubai. For hundreds of years it was the domain of fishermen, traders, pearl divers, and nomads who wandered in the desert. Conflicts between warring tribes left Dubai underdeveloped and without a sustained population until the late 1700s, when regional commerce began to grow. In an effort to establish maritime stability in the region, in 1820 Great Britain made Dubai and other Arabian Gulf sheikhdoms part of a protectorate called the Trucial States. When seven of the Trucial States were granted independence and formed the United Arab Emirates in 1971 and 1972, Dubai was just a small port town in a tiny new nation of about 180,000.

Today, Dubai is a modern logistics hub and the commercial capital of the United Arab Emirates, with a GDP that rose 17.6 percent to almost US$27 billion in 2004. In the 1990s, Dubai cemented its position as the Middle East’s premier cargo hub, and hundreds of new projects have continued the Emirate’s diversification by encouraging tourism and other industries. (Figure 14.1) The greatest indicator of the Emirate’s transformation is that transport, freight, telecommunications, and travel accounted for the largest share of GDP in 2004. The Crown Prince of Dubai, His Highness General Sheikh Mohammed bin Rashid Al Maktoum, has often been quoted as saying that the role of government is to manufacture opportunities for business.

Sheikh Mohammed’s words reflect the legacy of his family, which for many years welcomed trade and economic development as a way of improving the standard of living. In 1901, his great- great-grandfather Sheikh Maktoum established Dubai as a free trade port, abolishing import and export taxes, giving away land, and guaranteeing protection to traders. 41 In the 1950s and 1960s, before the formation of the UAE and the discovery of oil, his father, the late Sheikh Rashid bin Saeed Al Maktoum, focused on making Dubai a regional trading hub. He established public services and modern infrastructure, and undertook major public works projects such as dredging the creek to facilitate use by larger trading vessels. When Sheikh Rashid—affectionately known as the Father of Dubai—ordered the construction of Port Rashid in 1967, engineers studied ports in Singapore and Holland as models. 42

Jebel Ali Port, now the largest man-made port in the world, was his personal brainchild—at a time when many people thought it a crazy idea and questioned whether it would ever see enough traffic to justify its size. Dubai is situated adjacent to major trade lanes and sits directly at the crossroads of Africa, Asia, and Europe.While the Emirate covers only 3,885 square kilometers (2,414 square miles) of desert, from the very beginning its ruling family has been intentional about using its geographic location to its advantage in commercial activities.

In Dubai, the government has taken an active role in business, but it has done so with the intent of facilitating trade and investment, and above all, managing these entities in a commercial way. This trade-friendly attitude has been a key factor in the city-state’s economic success. Specific policies include a liberal trade system, an open sky policy, duty-free exports, government incentive schemes, such as free trade zones with tax holidays, import duties standardized at five percent (due to the UAE’s membership in the Arabian Gulf Cooperation Council customs union), and paperless customs procedures which reduce processing time from four hours to 10 minutes. Trade in Dubai has also been bolstered by its strategic location, competitive operating costs, reliable sailing and flight schedules, the large, cheap labor force provided by South Asian countries, and the fact that competition for business between the port facilities of the different emirates has kept user rates to a minimum and put a premium on services. The combination of these factors has led to the development of tremendous foreign investment in Dubai, making the Emirate a major contender in the international arena. Its free zones have provided a home for the Middle East headquarters of major multinational companies, and have proven that Dubai has the infrastructure to support modern supply chains.

Transport Infrastructure

A center of trade and commerce for many centuries, the Middle East has experienced rapid growth in modern transport logistics in recent years.The region connects Europe, Africa, the CIS, Asia, and the Far East, acting as a virtual causeway for trade. The industry has grown consistently in recent years, even as other regions suffered from problems such as SARS, high fuel prices, and airline troubles after September 11. The Middle East logistics market was valued at more than $10 billion in 2005, and this demand is not expected to slow down any time soon. According to forecasts for the $100 billion global transport and logistics market, growth in the Middle East will outpace other regions. 43 Consolidation, privatization, and competition in the coming years are sure to push traffic and service levels even higher.

Dubai may not be as well positioned for multi-modal connections as other regional port cities, as it is located inside the Arabian Gulf instead of on a major ocean. However, it is a place unique to the world, where freight logistics providers have been enabled by the government to act as the true wheels of commerce. Thanks, in part, to its superb transport infrastructure, Dubai is the world’s third most active re-export hub after Singapore and Hong Kong. Dubai Ports Authority (DPA) is the Middle East’s premier seaport, and includes Jebel Ali, the world’s largest man-made port. In 2004, DPA displaced Antwerp as the tenth-ranked port in the world, having handled a total throughput of 6.42 million TEU, up from 5.15 million in 2003. DPA has refined the art of port operations to such an extent that its international management arm Dubai Ports International is now the world’s fifth largest port operator, having acquired CSX World Terminals at the end of 2004.

Dubai International Airport’s cargo movement registered a 22 percent growth in 2004, with a total freight movement of 1.17 million tonnes. The Dubai Flower and Perishables Centre, located just off the runway at the Airport, is a state-of-the-art automated facility dedicated to horticultural and perishable shipments. Its 150,000-ton capacity will make Dubai the horticultural hub of the Middle East and further support freighter traffic in the region. Jebel Ali will eventually have its own international airport and a 25 square kilometer Logistics City, both adjacent to the existing Jebel Ali Port and Free Zone. Dubai Logistics City will offer space for logistics activities, manufacturing, trading, and warehousing. This multi-modal logistics platform will be located inside a bonded customs zone, offering seamless transit between air, sea, road, and, eventually, rail.

Dubai Municipality is constructing the world’s most advanced urban light rail system, to be operational by 2010. This passenger rail network for the Emirate is hopefully only the first chapter in the development of a larger regional rail network that will include freight transport. (Chapter 19)

Sea-Air Combined Transport and Air-Air Trans-shipment

Dubai’s pioneering role in sea-air combined transport is a good way to illustrate the far-reaching effects of its government’s pro- trade policies. Beginning in the 1970s and 1980s, sea-air via Dubai became a revolutionary, cost-effective link between East and West. Before its development, moving freight from Asia to Europe was an expensive, time-consuming process that could involve transit in North America. The journey could involve three different weight/ volume ratios and three currencies. However, at the same time, freight traffic to the Middle East was purely one-way, giving the region the world’s worst transport imbalance. The UAE and its neighbors were still reeling from the discovery of oil, and most imports consisted of oil-related equipment, including project cargo and building material for the country’s burgeoning infrastructure. Of course, the only export from the UAE was oil.

Fortunately, while oil revenue was pouring in, customs legislation in Dubai was modified and the ports and airports infrastructure were modernized. Two days after a series of meetings between industry leaders and Customs officials, the late Sheikh Rashid made the decision to allow expedited transfers of sea-air transit cargo without duty payment. This was a bold and far-reaching decision, for it catalyzed Dubai’s growth in transit traffic.

In 1978, the first sea-air shipment (exhibition goods from Australia bound for Tripoli, Libya) transited Dubai. The cargo was shipped to Dubai on NYK and then airlifted on a chartered IAS B707F. The total transit time was about 20 days, compared to the approximately 45 days that would have been required to take the cargo by direct ocean service via the Suez Canal. Dubai soon saw a second sea-air shipment, this time garlic presses shipped from Mumbai to London. By the end of 1979, approximately 170 tons of sea-air cargo was moved from the Far East and Indian subcontinent to Europe and North America via Dubai.

By the end of the 1980s, the sea-air figure had risen to around 20,000 tons per year. With emerging markets nearby in the CIS, Africa, Middle East, and Indian subcontinent, the Dubai hub became a conveyor belt. By the end of the 1990s, approximately 45,000 tons of sea-air cargo were shipped per year, with about the same figure for air-air trans-shipment. The imbalance that had once characterized cargo traffic to Dubai disappeared, as the Emirate had finally become a mature, well-rounded transit point. Sea-air freight, which had once been merely fill-in traffic, became a successful product in its own right. Finally, we are witnessing Dubai’s transformation from conveyor belt to twenty-first century logistics gateway. With growing charter operators and ad hoc flights originating in Dubai, freighter traffic is increasing. Further complementing Dubai’s multi-modal transport capabilities are new locally- and regionally-based freighter operations that are only about 10 years old.

Dubai has also become the region’s premier air-air trans- shipment hub. It offers tremendous benefits to carriers because it connects them to destinations that would otherwise be unreachable or very costly to serve from origin points. Acting as an air-air trans- shipment gateway, Dubai has alleviated capacity constraints and established itself as a viable connection in the center of the growing Asia-to-Africa trade lane.

Outlook

Thanks to developments such as electronic customs processes, smooth multi-modal connections, and the use of the world’s largest gantry cranes in Jebel Ali Port, Dubai does not suffer from friction in its trade logistics system in the same way as other countries presented in this chapter. These successes mean that, out of the whole Middle East/North Africa region, Dubai’s freight logistics providers are best equipped to successfully adapt, evolve, and add value to their customer’s supply chains. With a world-class trade infrastructure to help supply chains run smoothly, freight logistics providers in Dubai are in a comfortable position. They have many opportunities for short-term business gains. What is lacking, however, is vision. Freight logistics providers should share in the government’s long-term vision for Dubai and work with it to find long-term solutions.They must develop a culture of innovation that sees beyond the successes of the present to the major challenges of the future that will arise from Dubai’s rapid growth. As the Emirate as a whole looks toward the next 25 years, these are some challenges it must address.

Planning and Segmentation

The government of Dubai is characterized by a unique willingness to cooperate with the private sector. This sentiment has been echoed by the National Association of Freight and Logistics (NAFL), which has represented the interests of the freight forwarding industry in the UAE since 1991 and is the first and only such organization in the Gulf. According to NAFL, the government has been extraordinarily cooperative and ready to solve problems. Developers, too, recognize that the government is open to just about any conceivable project, from an indoor skiing center, to the world’s tallest building, to groups of man-made islands off the coast. However, intra-governmental cooperation is harder to gauge. As population, foreign investment, trade, and development grow, it may become more difficult for the government’s various arms to avoid segmentation and work toward a unified vision for the Emirate. A lack of intra-governmental cooperation and communication can hurt planning: there are risks of duplicated efforts, competing interests, and overlapping projects. If there is a risk of Dubai’s bubble bursting, or of delays in the execution of projects, it can be mitigated with communication and coordination across the government, with careful planning instead of last minute quick fixes for major infrastructure challenges.

For planners and project managers, the “plan-execute-review” three-step process will need to be followed for all new projects. This approach is essential in rapid-growth economies such as Dubai, where there is a risk of duplication and of new projects being implemented so fast that quality falls by the wayside. First, coordinators must spend a significant amount of time in the planning and conceptualization stage. In Dubai, for example, this would involve making the government’s vision for the Emirate more transparent to its national population and to government agencies, so that they can buy into this vision and be committed to new developments. Periodic communications and updates on the status of major projects will be crucial (using a specific new communication tool which should be devised solely for this purpose), and will also help assess the population’s feedback and their opinions on some of the undertakings. In the development stages, such a study would be invaluable. This first step is the point at which coordinators should decide what aspects of the project fit or do not fit into the master plan. They must assess all possible avenues and make their mistakes on the drawing board, because it is easier to erase what has been sketched out on paper than to tear down what has already been built. Negative experiences and mistakes of the past should be taken into account in this stage, in order to avoid committing them again. There are tremendous benefits to be gained by examining past mistakes.

Second, after careful planning, implementation should be prompt and expeditious. Third, after the project is completed, managers should review whether execution matched up with the original plans and concept. This review stage is just as important as planning and execution, for it helps managers learn lessons that can be applied to future projects. Reviews should be undertaken periodically—not just once, at the end of the project.

Unemployment

The Middle East must confront high unemployment rates, which stood at 13.4 percent in 2004. 45 In Dubai, there is a great need to include nationals in the work force.The government is undertaking initiatives to realize this, but further training is required, as are programs to increase retention. Long-term investments in training, job creation, and retention for locals are important to Dubai’s future. The Emirate faces the challenge of empowering workers— especially government workers—to ensure competent decision- making from top to bottom.

Accountability

In many ways, Dubai is at an infant stage in its development, having identified problems and studied the solutions found in other countries. However, there is a need for legislation to bring about accountability and raise standards in the logistics industry. If it is to be a global player in an increasingly flattened world, Dubai must ensure that it has standards in place to safeguard the freight industry and its customers. Accountability will provide a much- needed sense of security to anyone dealing with Dubai in any aspect of freight transport.

A key step toward accountability involves professional certification for freight logistics providers. FLPs must demonstrate their competence in freight management.A training and certification program could be developed by the national association and endorsed by the government such that it becomes a prerequisite for operators. Second, freight logistics providers should be required to hold professional liability insurance. This is a basic requirement in most countries because it helps protect freight logistics providers as well as customers in case of accidental loss or damage to cargo through professional errors or omissions. Third, Dubai needs a professional arbitration and consumer protection board, which is up to the same standards as the rest of the world. Dubai’s reputation as a global business hub must be reinforced with a modern, world- class body that can safeguard consumer interests and identify who is at fault in a speedy manner in commercial disputes.

A Hub for Humanitarian Logistics

In Chapter 15, we will look at some of the challenges facing humanitarian logistics providers who must maintain a permanent state of readiness. For while we might like to think that there are no surprises and that we can predict the future, political turmoil and natural disasters are unavoidable and often unexpected.

It is therefore encouraging to watch Dubai’s development into the region’s humanitarian logistics hub. Dubai Aid City (DAC) and Dubai Humanitarian City (DHC) are two free zones which facilitate the long-term presence of humanitarian relief organizations by offering warehouse and office space in a secure, strategic location. DAC and DHC bring together suppliers, relief providers, NGOs, donors, and related businesses. These companies and organizations can collaborate to foster institutional learning, develop sustainable humanitarian solutions, disseminate best practices, and find ways to reduce shipping and purchasing costs for NGOs and relief aid suppliers.

In a region that has seen much war and conflict, Dubai’s role in humanitarian relief has become very clear. In 2004 and 2005, tsunami relief efforts made great use of the Dubai hub. Conflicts in nearby Iraq and Afghanistan increased the amount of project cargo transiting Dubai, and refugee situations in Sudan will continue to necessitate the distribution of humanitarian aid materials via Dubai. The Emirate is well positioned to place goods and services in a strategic location in the event of problems. It also makes an ideal humanitarian operations staging point, from which a team of first responders can be mobilized in a matter of hours to provide relief and save lives.

As a practitioner whose own business has grown thanks to Dubai’s pro-trade foundation, I am quick to identify the challenges of the future. While Dubai has made major strides in the economic and logistical spheres, the pitfalls we have identified are of some concern. Will Dubai continue adding value and be able to sustain multi-modal transport chains? Regional redistribution and multi-modal transport are likely to continue their growth as the gateway is stretched further with the help of the Dubai Flower and Perishables Centre and the Jebel Ali Airport and Logistics City. Future growth will also depend on keeping pace with international best practices not only in trade, but also in areas such as data reporting, quality control, trade-related dispute settlement, arbitration, and labor practices. Dubai’s leadership should not lose sight of the core characteristics that helped the Emirate become such a successful logistics hub. And as further opportunities open up for Dubai, the UAE, and the GCC, a future-focused outlook will become increasingly important not only in Dubai but among its more traditional neighbors as well.

1 World Bank, Egypt in the Global Economy: Strategic Choices for Savings, Investments, and Long-Term Growth, 29.

2 Egyptian International Freight Forwarding Association (represented by Vice Chairman Eng. Hussam Leheta, Board Member Mrs. Nazli El-Shazli, and Board Member Mr. Walid Badr), in discussion with the author, February 2004.

3 Ibid.

4 Emerging Egypt 2004, 97.

5 Ibid., 93.

6 World Bank, Egypt in the Global Economy: Strategic Choices for Savings, Investments, and Long-Term Growth, 33.

7 Subramanian and Arnold, Forging Subregional Links in Transportation and Logistics in South Asia, 96.

8 World Trade Organization, “ India Trade Policy Review,” http://www.wto.org/english/tratop_e/tpr_e/tp71_e.htm (accessed June 8, 2005).

9 Air Cargo Agents Association of India.

10 Viswanadham and Gaonkar, Leveraging Logistics to Enhance Indian Economic Competitiveness, 3.

11 Subramanian and Arnold, Forging Subregional Links in Transportation and Logistics in South Asia, 71-72.

12 Ibid., 41.

13 Ibid., 71-72.

14 Léautier, “Urbanization and Regional Trade in South Asia: Issues and Options,” 115.

15 Viswanadham and Gaonkar, Leveraging Logistics to Enhance Indian Economic Competitiveness, 18.

16 Subramanian and Arnold, Forging Subregional Links in Transportation and Logistics in South Asia, 96-97.

17 Ibid., 96-94.

18 Dai and others, 2002 China Logistics Provider Survey, 23.

19 Xiaodong Wang (Department of International Transport and Logistics, School of International Trade and Economics, University of International Business and Economics, Beijing), in discussion with the author, May 2004.

20 -Ing Dianjin Fang, “Logistics Challenges in China.”

21 Shafaeddin, “Some implications of accession to WTO for China’s economy,” 108.

22 Dai and others, 2002 China Logistics Provider Survey, 23.

23 Ibid., 9.

24 Ibid., 13.

25 Mooney, “China’s Rail Overhaul: A Mammoth Task,” 22.

26 -Ing Dianjin Fang, “Logistics Challenges in China.”

27 Shafaeddin, “Some implications of accession to WTO for China’s economy,” 108.

28 Xiaodong Wang, in discussion with the author, May 2004.

29 Dai and others, 2002 China Logistics Provider Survey, 23.

30 World Bank, “South Africa at a Glance,” September 15, 2004.

31 Miles, Feulner, and O’Grady, Index of Economic Freedom, 345.

32 “The First State of Logistics Survey for South Africa 2004,” 17.

33 Gill Gifford, Lee Rondganger, Kevin Ritchie, and Baldwin Ndaba, “Airport Shootout,” The Star, September 17, 2004.

34 World Health Organization, “Globalization, Trade, and Health Glossary,” http://www.who.int/trade/glossary/story051/en/(accessed May 14, 2005).

35 “The First State of Logistics Survey for South Africa 2004,” 5.

36 Ibid., 13.

37 Ibid., 17.

38 Ibid., 16.

39 Mare, “Supply Chain Excellence in South Africa,” 6.

40 “The First State of Logistics Survey for South Africa 2004,” 17.

41 Wilson, Father of Dubai: Sheikh Rashid bin Saeed Al-Maktoum, 33.

42 Ibid., 150.

43 Business Monitor International, “UAE Freight Transport Report Q1 2005,” 5.

44 Airports Council International, “Cargo Traffic 2004 (Preliminary Data).”

45 World Bank, “ Middle East and North Africa Region 2005 Economic Development and Prospects: Oil Booms and Revenue Management,” v.

CHAPTER 15

HUMANITARIAN LOGISTICS:

TOWARD A PERMANENT STATE OF READINESS

“You do not know what you need, you do not know where you need it, but you have to get it there in a short amount of time under diffi cult conditions or people will die.”

Bernard Chomilier

Head, IFRC Logistics Division

Political and military conflicts can turn thousands of people into refugees or internally displaced persons in very short periods. Natural disasters also leave vast numbers homeless and in need of basic shelter, food, and water, a reality played out after the tragic South Asian tsunami of 2004. Though natural disasters, war, and ethnic conflict are not new problems, today modern systems exist to respond to victims’ needs. In addition, just as businesses rely on logistics for the movement of goods all over the world, so relief organizations rely on logistics operations to bring food, water, and other supplies to the people in need in disaster situations. Humanitarian logistics involves all the processes and systems needed to mobilize people, resources, skills, and knowledge to help vulnerable people affected by natural disasters and complex emergencies. 2

A humanitarian logistics operation may include planning, procurement, mobilization of personnel and transport, customs clearance, warehousing, transport, track and trace, coordination with other organizations, and in-country operations such as local transport, last-mile delivery, and distribution. Workers must also be prepared to transport refugees in repatriation or relocation efforts. As in any logistics operation, all involved parties must share information. And like corporate logistics, humanitarian logistics requires leadership by skilled personnel, adequate resources, a reliable delivery infrastructure, and close cooperation between all players (i.e. relief workers, beneficiaries, and civil/military authorities).

Because emergencies are unexpected occurrences, relief organizations must plan for every contingency and be ready to act at a moment’s notice. In this respect humanitarian logistics is much more demanding and uncertain than corporate logistics, which affords more time for planning and strategizing. One way to compensate for the last-minute nature of the work is to warehouse food and other supplies in locations around the world so that it is closer to potential areas of conflict. The International Federation of Red Cross and Crescent Societies (IFRC) has three mechanisms to ensure rapid response: a disaster relief emergency fund (which provides money to initiate activity before the international appeal for funding is launched), a field assessment and fact-gathering team, and finally the emergency response units.

In recent years, the IFRC has improved its procurement procedures, which in the past have been complicated by unsolicited donations. By standardizing relief items and making agreements with suppliers on price, quantity, and delivery requirements, the IFRC can be sure that recipients will receive the supplies they actually need. They also maintain regional warehouses and logistics units. 3

In addition to the tasks of planning and preparedness, there are a number of challenges that arise from the volatile contexts in which humanitarian logistics operations take place. Operations often occur without government support in chaotic environments where physical infrastructure has been destroyed. Transport capacity may be limited or non-existent. In the Iraq war, more than ever before, militants directly targeted humanitarian workers, adding a new type of threat. Ultimately, the constant uncertainty of humanitarian logistics calls for improvisation and creative problem solving. If practiced by experienced professionals, these tools will be helpful in some situations.

For many years, corporate logisticians have been developing and refining strategies and technologies for optimizing global supply chains. Unfortunately, this expertise has not trickled down to humanitarian relief organizations, many of which suffer from poorly defined manual processes, insufficient funding, fragmented technology, high employee turnover rates, and a lack of institutional learning. The Fritz Institute, a non-profit organization dedicated to strengthening humanitarian relief organizations, has stressed the great need to mobilize logistics and technology expertise and resources from the corporate and academic communities. In spite of the systems NGOs have in place for emergency response, and even though they try to maintain a permanent state of readiness, we will see that in the aftermath of the 2004 tsunami, their years of planning for the unexpected were not sufficient to deal with the chaos they would encounter.

Humanitarian Logistics in Action: Tsunami Relief in South Asia

Central transport logistics challenge: supplying up to 5 million displaced persons with food, water, and other supplies in an environment of poor transport infrastructure, prohibitive red tape, and the overlapping work of 30 aid agencies.

Following the tsunami at the end of 2004, we witnessed the largest relief effort in history, serving millions of displaced people in several south Asian countries. Money was no object for relief providers, due to massive financial contributions from around the world. However, despite the best intentions of agencies and NGOs, the relief efforts faced a number of challenges that slowed down their operations and kept supplies from reaching victims fast enough. Too many organizations were involved—in some areas, the work of 30 separate aid agencies had to be coordinated. A post- tsunami survey of logisticians who were in the field indicated that there were 72 different meetings each week. 4 In addition, each of these organizations practiced their own variety of management styles, logistics strategies, and procedures. Organizational problems resulted from a lack of communication, whereby organizations were unaware of what services the others were providing. The result was poor supply chain visibility and plans that fell short of needs. Poor or nonexistent infrastructure in some areas made transport difficult or impossible. Supply chains competing for procurement and transport caused congestion. An overflow of goods at key staging points, such as airports, clogged up the supply chain. While the donations of clothing and other packaged goods were pouring in thanks to the generosity of the world community, relief agencies were not able to distribute them efficiently due to the large volumes. This created the traditional supply chain problem of backlog management. Greater coordination and visibility at the outset may have alleviated this problem to some degree.

There were not enough appropriately trained staff. A shortage of logistics experts in the field meant that many organizations had to re-allocate their most experienced logisticians from other assignments. 5 Procurement delays and a lack of proper supply chain management software meant that staff often completed supply chain processes manually (i.e. through the use of simple spreadsheets instead of a more sophisticated software). 6

High levels of bureaucracy also hindered relief efforts. For example, some governments insisted that they would only take aid from certain organizations. Others showed preferential treatment to certain towns or regions by delivering disproportionate amounts of aid to them. In a particularly frustrating incident of red tape at its worst, nine trucks carrying donations from Holland were stranded for days at the Pakistan/India border, where officials required exemption papers or a duty of 1 million rupees. On their journey from Holland, the trucks had passed through seven other countries without a problem. 7

Throughout the tsunami relief effort, organizers emphasized the need for greater cooperation between relief organizations and private logistics companies. This cooperation did occur to a great degree, as many members of the transport industry (shipping lines, airlines, trucking companies, forwarders, integrators, seaports, and airports) offered in-kind and monetary donations.

Humanitarian Logistics in Action: The Aftermath of the Rwandan Genocide

Central transport logistics challenge: supplying more than 2 million refugees with food, water, and other supplies in an environment of extreme violence and poor transport infrastructure.

The aftermath of the Rwandan genocide of 1994 provides another good example of the formidable logistics challenges that can arise in refugee crises. In the spring of that year, the tiny African nation of Rwanda plunged into a bloody conflict in which the Hutu ethnic group attempted to wipe out the Tutsi ethnic group. The United Nations and the international community have often been criticized for not doing enough to stop the genocide, which in only 100 days left 800,000 people dead.

As the crisis escalated in April 1994, 2 million people left Rwanda. By August, there were 1.2 million refugees in Zaire (now the Democratic Republic of the Congo), 580,000 in Tanzania, 270,000 in Burundi, and 10,000 in Uganda. 8 There grew to be an additional 1.5 million internally displaced persons within Rwanda, but living conditions there were not as bad as in the Zaire camps. Eight hundred thousand refugees were camped in Goma, Zaire by July 1994. 9 A number of organizations worked in these camps to provide the refugees with adequate food, shelter, and repatriation assistance. These included UN groups such as the United Nations Assistance Mission for Rwanda (UNAMIR), NGOs, and military contingents. The UNAMIR provided some services to the NGOs, such as security, information sharing, direct deliveries using UNAMIR trucks, and logistics (including transport, fuel, communications, medical support, and air transport). 10

The relief operations in the Zaire camps turned out to be successful in some ways, but not in others. According to Trevor Findlay of the Stockholm International Peace Research Institute, “When the UN and the international community finally recovered their equanimity, a gallant effort was mounted to feed, clothe and medicate millions but not to provide them with security and not to address the political and military realities of their dispersal and incarceration in refugee camps.” 11

There are many obstacles that can hamper humanitarian logistics operations—poor transport infrastructure, over-supply, under- supply, uncooperative or nonexistent local governments, a lack of warehousing space, the stagnation of the supply chain due to failure to order the movement of supplies and services, and high turnover among program staff due to their short-term contracts. Logisticians must coordinate procurement, transport, inventory control, collection points (warehouses), and temperature-controlled storage, tasks that can double or triple in complexity when working in an emergency in an under-developed country.The refugee camps in Zaire suffered specifically from poor transport infrastructure and the limitations of the geographical area. The second major problem was securing the distribution of food and other supplies in a highly militarized environment.

Transport Infrastructure

In addition to these geographical limitations, eastern Zaire lacked the necessary transport infrastructure for undertaking this operation. Andrew McClintock, a senior UN logistics officer working in Zaire in 1994, describes roads full of potholes or ankle- deep mud, unusable runways, and mudslides that created 80-vehicle traffic jams. Within the 160-kilometer by 80-kilometer (100-mile by 50-mile) area served by the Bukavu refugee camp, there were only 35 kilometers (21 miles) of paved roads. The area also lacked a postal system, functioning banks, telephones, dependable water and electricity supplies, road and bridge maintenance, or any effective local government or civil authority. 12

McClintock was put in charge of logistics at the Bukavu, Zaire refugee camps after the genocide. His team was responsible for coordinating all logistics activity of the other 20 relief agencies working on-site, the supply of non-food items for 200,000 people, and refugee transport. Non-food items for the Bukavu refugees included, for each family: three blankets, two water cans, a kitchen set, a plastic sheet, and 1 kilogram of soap per month. These supplies came down 16,090-kilometer (10,000-mile) supply lines, sometimes by sea via Mombasa, and sometimes by air via the Entebbe (Uganda) or Kigali (Rwanda) airports. The multi-modal route of food items to the Zaire camps was remarkably complicated: by sea to Dar es Salaam, by rail to Kigoma on Lake Tanganyika, by boat to Bujumbura or Uvira, and finally by truck for the 160-kilometer (100-mile) journey to the camps. This trip, totaling less than 1,000 miles, took 25 to 35 days.

The problem with the supply lines was that the flow was entirely irregular, with consignments of unexpected sizes arriving at unexpected times. McClintock’s staff could not predict demand levels in the camps, nor did they know what supply to expect from overseas. The non-food items were supposedly designed to take up 0.37 cubic meters (0.402 cubic yards) per family set. However, on arrival, it was discovered that they would need 50 percent more storage space than expected. Goods were stored in four available warehouses, two large and two small, all extended by open air storage due to space constraints. These warehouses were not in locations convenient to any sort of supply route—one was an airport hangar, and one was a school kitchen. The total available storage space was 6,000 cubic meters (6,561 cubic yards). For transport from warehouse to camp, McClintock had at his disposal 30 to 40 trucks, maintained and operated by contracted NGOs. Transport plans were often upset by the weather, bad roads, political changes, and the need to use some trucks for refugee transport.

Distribution in a Militarized Environment

The second major problem facing logisticians was that the camps in Zaire (especially at Goma) became highly militarized communities controlled by the perpetrators of the genocide, known as génocidaires , who had since fled Rwanda’s killing fields.These gang members and ex-army officials were fed and provided for in Zaire because they were technically refugees, but their presence in the camps led to further violence and bloodshed. The camps became, in fact, “a microcosm of Rwanda before the war,” and presented a significant military threat to Rwanda’s new government. 13 More immediately, the militarization was a further obstacle to relief workers attempting to organize the distribution of food and supplies, forcing them to work in an inhospitable environment under conditions of violence, intimidation, and corruption. At that time, it was a UNHCR practice to use existing community structures in food distribution, as this has been found to be helpful to refugees. However, in Goma II, where mafia-like gangs were the only “existing community structures,” this practice only strengthened criminal elements in the camp. 14 Criminal control over distribution meant that the distribution of food and supplies was routinely disrupted by physical abuse, harassment, threats, rape, extortion, killings, and gang warfare. Refugees were beaten to death for discussing repatriation, or for complaining about the quantity of food received. On some days food distribution was stopped altogether. UNHCR ultimately dealt with the security problem by deploying a Zairean security force, which was supported by international advisers, funding, and equipment. By mid-1995, the situation in the camps had generally improved and the soldiers’ activities were limited to low-level intense security operations. 15

Rwanda: Lessons Learned

One criticism of refugee-relief operations in and around Rwanda after the genocide was that UN entities did not work together effectively; that there was not a clearly distinguishable chain of command in the operation. However, coordination between the UN, NGOs, and non-UN military groups worked better than in 1993 operations in Somalia. 16 This was due in part to effective weekly planning meetings, which were attended by up to 100 representatives of the various organizations who discussed topics such as sanitation, security, and food supplies. The meetings incorporated the viewpoints of all concerned parties and therefore were highly effective times of planning, communication, and coordination. McClintock, too, used meetings to coordinate with other agencies, finding that it was a successful way to foster communication and cooperation. He called the level of inter-agency cooperation in the Bukavu relief operation “unusually good.” 17 The Rwanda situation presented some unique problems to logisticians, who had to battle the elements, a miserably poor infrastructure, and armed military factions within the refugee camps.Their methods may not have been revolutionary, but in some respects, their cooperation was better than that of Somali relief work in 1993. This demonstrates that they had, in fact, learned lessons from a previous operation.

The Rwanda and South Asia relief operations demonstrate some important points about the challenges of providing humanitarian relief. First, humanitarian logistics demands careful communication and coordination among multiple bodies so that the head agency can maintain visibility over the entire operation. It can then prevent duplicated efforts and backlogged supplies. Steps toward preparedness such as regional stockpiling and supplier agreements are also very important. However, while planning should be attempted at the outset, plans may have to be set aside due to the volatility of the environment. In such cases, creative problem-solving skills may be the most important resource that the logistician can muster.

Humanitarian logistics as a whole needs the following:

• Training for logisticians

• The creation of collaboration and coordination mechanisms before a disaster occurs (preparedness) • The transfer of coordination to a central organization • Seamless coordination with the military, private sector, and humanitarian organizations

• Developing new technology for track/trace and disaster relief supply chains. These new applications will utilize the best of corporate logistics, but tailor the software’s functions to the needs of the humanitarian logistician. †

The private sector clearly has the expertise and ability to serve humanitarian relief organizations in a new way. Yet, these organizations have often been afraid of the private sector, imagining that it exists only to make money. By thinking this way, humanitarian organizations have at times inflicted unnecessary problems and costs on themselves. The barriers must now come down. When humanitarian and corporate logisticians can work together to share best practices, they will be better able to use world-class logistics principles to assist those who are suffering.

------------------------------------------------------------------------------------------------------------------------------------

† The Fritz Institute worked with IFRC to develop a humanitarian logistics software package that performs mobilization, procurement, logistics and tracking, and reporting functions. In a simulation of the response to the Gujarat earthquake of 2001, the software increased the speed of the relief process by 20-30 percent. The IFRC had been using the software for more than one year when the tsunami hit, so they were able to utilize it effectively in tsunami relief operations. They found it to be a stable, well-written program and a particularly effective tool for documenting field requirements, requesting donations, allowing donating parties to see what requirements existed (and then filling them), and goods delivery tracking. 18

1 Thomas, “ Humanitarian Logistics: Enabling Disaster Response,” 7.

2 Ibid., 3.

3 Samii, Van Wassenhove, Kumar, and Becerra-Fernandez, “IFRC, Choreographer of Disaster Management: Preparing for Tomorrow’s Disasters.”

4 Fritz Institute, “Logistics and the Effective Delivery of Humanitarian Relief,” 3.

5 Ibid., 2.

6 Ibid., 2.

7 “ India blocks Dutch tsunami aid,” Daily Mail ( Pakistan), February 7, 2005.

8 UNHCR, The State of the World’s Refugees: 50 years of Humanitarian Action, 246.

9 Findlay, “ Rwanda ( UNAMIR): Background Paper,” 188.

10 Ibid., 189.

11 Ibid., 193.

12 McClintock, “The logistics of a Third-World relief operation,” 358-365.

13 UNHCR, The State of the World’s Refugees: 50 years of Humanitarian Action, 250.

14 Halvorsen, “Protection and Humanitarian Assistance in the Refugee Camps in Zaire: The Problem of Security,” 313.

15 Ibid., 319.

16 Findlay, “Rwanda (UNAMIR): Background Paper,” 184-185.

17 McClintock, “The logistics of a Third-World relief operation,” 364.

18 Hugh Peterken (Head, Information Systems Department, IFRC) in discussion with the author, July 2005.

PART III

Predictions

CHAPTER 16

ECONOMIC MOBILIZATION THROUGH

TRANSPORT LOGISTICS

“Science has not yet mastered prophecy. We predict too much for the next year and yet far too li le for the next ten.”

Neil A. Armstrong

It is helpful to divide history into distinct periods to explain economic, social, and political trends. We are in the midst of what has been called the information technology wave, which has helped us harness the power of information for the optimization of business processes, transport, entertainment, and countless other activities. But what comes after the current wave? What is the next step? How will we use information technology to go even farther?

It is possible that the next techno-economic wave will be a neurotechnology wave, lasting from approximately 2010-2060.We will discover that neurotechnology is the ultimate business weapon and competitive resource. This is a revolutionary way of thinking about mental health, for most of us take our brains for granted. Imagine a neurotech frenzy building by 2020, ultimately forcing government agencies to regulate the industry and deal with ethical and legal issues like brain privacy and security. 1 Imagine being able to erase and replace memory, increase worker productivity by utilizing brain enhancers, increase memory retention, decrease anxiety and stress, improve financial forecasting, and find cures for mental illnesses. The coming neurotechnology wave will have profound implications for society. It will initiate new avenues of economic development, help people discover new forms of artistic expression, and enable people to consciously improve emotional stability, enhance cognitive clarity, and extend sensory experiences. Neurotechnology also presents potential threats, such as its use for coercive memory erasure and neurowarfare. 2

Neurowarfare and brain privacy may seem unrelated to the topic at hand—transport logistics of the future—but in fact, they illustrate the need to be ready for the technology revolution that is coming. In fact, the information technology revolution has only just begun, and what is forthcoming in the next 50 years will touch all aspects of our lives and affect neurology as much as freight transport. New vehicles, fuel sources, infrastructure, and business opportunities are on the way, and the freight logistics industry must be prepared for the changes they will bring in the medium and long term.

The world has already witnessed the great economic development brought about by intercontinental maritime transport, road and rail transport, air cargo, and the globalization of information technology. The transport machines of the future are likely to carry more, travel farther, and be even more fuel efficient than any others we have so far seen. As such, these machines will take on even greater importance as agents of globalization. Furthermore, transport logistics will play an even greater role in economic development and the global competitiveness of nations. This chapter looks at the next generation of maritime, land, and air transport in an effort to conceptualize what freight transport might look like in the next 100 years and how it will catalyze economic development.

General Trends

It is important to distinguish between future requirements for passenger transport and freight transport. While the increasing use of information and communication technologies will increase mobility on a virtual level and will mean that humans need to travel less, they will at the same time have more freedom to travel more cheaply, more quickly, and to more places than ever before.

Demand for freight transport is expected to increase because businesses and individuals will place an even greater premium on the delivery of goods at predictable times.

Historically, it was customer demand for timely, low cost, reliable shipping that spurred the development of new freight transport machines and their corresponding infrastructure. However, modern transport technology must do more: it must minimize lives lost, negative impact on the environment, visual intrusion, noise pollution, and petroleum consumption. And it must continue to guarantee the fast, predictable delivery of raw materials for manufacturing, of components between assembly centers, and of products to end users. Keeping these new guidelines in mind, freight transport of the future will have the following characteristics.

• It will be fuel-efficient (in part by utilizing lightweight materials).

• It will not rely solely on petroleum.

• It will not interfere with nor be delayed by passenger travel, whether it is in motion or at rest in its port/ terminal.

• It will move door-to-door, not just port-to-port, or terminal-to-terminal.

• It will not be affected by inclement weather.

• It will add value to the goods by reducing the time they spend in port/terminal.

• It will offer customers more choices. (For example, there will be various options to serve the mid-speed market that exists between ocean freight and sea freight.)

One of the most important characteristics of freight transport in the future will be the combination of transport with information and communication technologies. First, it will be intelligent, or “smart,” meaning that it can provide detailed information about its location and the condition of its cargo at all times. Second, it will likely utilize electronic guideways (i.e. RFID) instead of physical guideways (i.e. the rails of today’s railways) or visual guideways (i.e. the painted lines of today’s highways). This will mean new sources of control over transport. In fact, control will eventually be transferred from its traditional human source (the driver/ pilot/operator) to infrastructure-linked control systems. Freight transport in the future will be automated (operable without human control) and will utilize technology to mitigate the risk of security breaches (i.e. smart containers, electronic container seals, tracking systems, etc.) We will observe some or all of these characteristics in each new type of transport technology presented here.

Ocean Transport

Today’s container ships carry 8,000-10,000 TEU, and some that are in development will carry 12,000 TEU. But these are sluggish vessels that can only travel at about 20-24 knots (37-44 kilometers per hour/23-27 miles per hour), and are even slower in bad weather. The challenge is to develop competitive vessels that provide faster cross-oceanic travel while offering even greater capacity and fuel efficiency. Two examples of new fast cargo ship technology are the FastShip by FastShip Atlantic and the Fast Container Ship by ADX Express.

FastShips have been in development since the late 1990s. Developer FastShipAtlantic claims that they will provide commercial service by 2008, traveling at a speed of 38 knots (70 kilometers/43 miles per hour) and crossing the North Atlantic in less than four days (even with the region’s notoriously bad weather). The vessel is short and tubby, with a concave hull that creates a wave at the stern. The wave lifts the vessel and keeps it from sitting too low in the water. FastShips will be able to carry a 10,000-tonne payload, and unload and reload in their dedicated terminals in six hours. The ADX Express Fast Container Ship is a pentamaran with a slim shape. It has a length of 274 meters (898 feet) and a cargo capacity of 8,000 metric tonnes. Its service speed is 37 knots (70 kilometers/43 miles per hour), with a top speed of 41 knots (75 kilometers/46 miles per hour). Developers claim that the vessel will achieve a trans-Atlantic crossing in four days. It is powered by water-jet propulsion and diesel engines. Instead of pushing a wave out in front, like the FastShip, ADX’s pentamaran pierces through the waves.

Rates for these services are expected to fall somewhere between current air and ocean freight rates. Fast ships traveling at 40 knots are not likely to threaten air cargo, as there will always be demand for the unparalleled speed that air transport provides. However, fast ships could take control of the freight that is currently on top of the sea freight market and at the bottom of the airfreight market. Of course, if fast cargo ships are to truly revolutionize ocean freight, seaports and container terminals will have to evolve to accommodate them. To accommodate bigger container ships, many ports will have to undertake major dredging projects. New technology means that ships will not only get bigger; they will also require specialized equipment. Will each new kind of ship require a dedicated terminal with unique equipment? It is likely that dedicated terminals for new ships will be developed at major hub ports, while smaller, older ships will be shifted to minor ports, leading to the development of more hub and feeder systems. Whether they are hubs or feeder ports, another important task is ensuring reliable access to ports (including inland ports). This means tackling the problem of traffic congestion on roads linked to the port, and even increasing the number of road and rail links to the port. Smooth connectivity will grow in strategic importance if a port wants to attract traffic and a country wants to stay competitive.

Air Transport

Chapter 18 will discuss the effects of high oil prices on the aviation industry. But the good news about high oil prices is that they encourage the development of new jet technology that focuses on creating more cost-effective and fuel-efficient aircraft. In the past, jet development concentrated on what we might call big technology: planes that were larger, faster, and could carry more. Today, with rising fuel costs, R&D focuses on planes that use less power and are more fuel-efficient. Airlines will continue to favor long range, wide-body aircraft, but fuel consumption will become an even greater concern. Therefore, we will likely see much lighter materials used. Other possibilities for aircraft technologies of the future are:

• Vertical take-off (This will eliminate the need for airports with runways and will increase door-to-door capabilities.)

• Rocket propulsion for travel in the earth’s ionosphere • Electrical force field technologies

• Building with composite materials (These are very light and cost effective, and they do not shrink and expand in mid-air the way metals do.)

• Heating and cooling systems that do not cause engine bleed because they do not run on power from the engine

The airfreight industry is often consumed with discussions about major aircraft manufacturers and whose planes will dominate in the future. The most important factor to consider, in this age of high oil prices and fuel surcharges, is their fuel efficiency. Air transport is, after all, the most fuel-intensive transport mode. Certainly, different trade lanes and routes will demand planes that can travel varying distances. However, all trade lanes will demand fuel efficient, money-saving aircraft. New technology will, of course, lead to the development of some fascinating new aircraft in the coming years. Two examples are wing-in-ground (WIG) vehicles and airships.

Boeing studied a conceptual WIG that carried up to 178 20-foot containers at approximately 450 kilometers per hour (279 miles per hour). The 1.27 million-kilogram (2.8 million-pound) payload was carried in the fuselage and wings. The Pelican ULTRA (ultra- large transport aircraft) was envisioned to fly non-stop across the Pacific to join proposed fast cargo ships in serving the mid-market between sea freight and airfreight. It could cruise as high as 6,096 meters (20,000 feet), but was more efficient when less than 15 meters (50 feet) above the ocean surface. As conceived, the Pelican operated from runways and was compatible with cargo handling systems.

Airships are powered, helium or hydrogen-filled aircraft that use a lifting gas for permanent buoyancy and rudders to control their direction. They cruise at a low altitude, require little ground infrastructure, and could link to other transport modes. Their vertical take-off and landing eliminates the need for runways. Semi-rigid airships are made of strong, lightweight materials. Rigid airships (also known as Zeppelins or dirigibles) have an internal frame and are held up by aluminum alloy, which means they are efficient only when they are large enough to achieve a good weight to volume ratio. Most airships so far have been rigid, but semi-rigid airships are lighter and thus would offer a higher payload. Airships will become particularly important for heavy lifts involving bulky cargo that would otherwise have to be disassembled at origin and then reassembled at destination.

Just as aircraft technology will undergo a major upgrade, so airports and air cargo hubs must look to the future and re-examine their strategies. The historical role of air cargo terminals was building, receiving, breaking, storing, and transiting shipments. At these traditional terminals, no value was added to shipments. In fact, traditional terminals could even diminish airfreight’s inherent value (time) by slowing down the transit process. But they can no longer afford to do this, for airports are key ingredients in economic development. According to Professor John Kasarda of the University of North Carolina at Chapel Hill, “Airports will be as important to business location and urban development in the twenty-first century as automobiles and trucks were in the twentieth century, railroads were in the nineteenth century, and seaports were in the eighteenth century.” 3 The airport cities and cargo hubs of the future will demand better, faster ground handling and value-adding services if they are to fulfill their goal of generating new concentrations of commercial activity.

Some airports will be dedicated to cargo and will be integrated into multi-modal logistics platforms. These platforms will have surrounding businesses that are dedicated to value-additions (especially for transit goods), have supply chain-linked business processes, and often deal with small, lightweight, high-value goods. Airport cities will extend geographically via hotels, retailers, distribution centers, industrial parks, office and research parks, and free trade zones. A good example of this development is Dubai Logistics City and Jebel Ali Airport (Chapter 14).

The continued success of air cargo will depend on reliable, efficient ground handling systems and multi-modal connections. This will be an important aspect of new airport cities. As we try to move freight off congested roads, these cargo hubs must be connected to reliable rail networks that are coordinated with flight schedules. These connections must offer flexibility of use and capacity, as well as cost optimization, and they must ensure that information always travels ahead of shipments. Planners who develop new hubs will also discover the importance of developing logistics centers in green field areas. This is a concept that applies to both airports and seaports. When confronted with the need to expand, it often makes more sense to build logistics and distribution hubs in new locations than it does to expand infrastructure at existing airports and seaports—especially if they are located in congested urban areas.

Land Transport (Road, Rail, and Underground)

Land transport does not need to wait for the challenges of the future to get in its way; it is already confronted with them. First, there is an urgent need to move freight off highways. This means finding ways for passenger and freight transport to co-exist, even in congested urban settings. Second, oil prices are increasing and supplies are running out, therefore we need to develop alternatives to the diesel fuel that currently powers land transport. In the face of both these challenges, we recognize that demand for trucking will not decrease any time soon, for it is currently the only way to provide door-to-door delivery. But there are some solutions to be considered.

Highways

Dedicated truck lanes (already in use in some areas) are separate from auto lanes. They allow trucks to bypass congested all-purpose lanes and they facilitate just-in-time deliveries. They also minimize the risk of truck/automobile accidents.

Intelligent highways (already in use in some areas) allow the dynamic allocation of road space.They control access to the highway based on whether a journey is being made to transport non-essential, high-value, or priority freight. The “smart” automobiles and trucks traveling on these roads will be able to receive information from the highway and respond appropriately.

In an automated highway system (AHS), specially equipped cars, trucks, and buses will travel under computer control in special lanes. An AHS will offer improvements in trip predictability, operation in inclement weather, mobility, and air quality. Future trucks (as well as passenger cars) will have the necessary technology built into them. This technology might include magnetometers for steering, sensors to detect obstacles and other vehicles, and automated braking and speed control. The ultimate goal will be hands-free, foot-free driving. Traffic on an AHS will comprise single vehicles operating independently or “platoons” of vehicles that travel in close, coordinated groups to maximize highway capacity.

Smart Container Tracking

Trucking can be vastly improved with the integration of smart containers and tracking systems, both of which are still limited in their use. They are likely to spread as the technology becomes cheaper and as more supply chain players recognize the value they can add to their distribution networks. While it will be feasible for each company to monitor its own trucks through a unique tracking system, we will eventually require a standardized, universal container tracking system so that containers and their contents can be monitored as they travel on any transport mode in any location. This may involve some combination of RFID and satellite technology.

Dedicated Long Distance Freight Corridors

In the past 50 years we have seen the importance of standardized containers that can be used in any transport mode. But what if vehicles themselves could be used in more than one transport mode? It is likely that we will eventually develop flexible vehicles that can operate on both road and rail. This will increase their mobility and reach, and it will multiply the available road/railway track on which they are able to travel. Flexible road-rail vehicles will be especially useful in dedicated long distance freight corridors, where they could travel unmanned on rail-like guideways at much higher speeds than are currently being achieved in rail transport.

Magnetic Levitation

Magnetic levitation (or “Maglev”) features high-speed vehicles that are propelled along a physical guideway by magnetic repulsion. Lifted above the guideway, they can travel at 400-500 kilometers per hour (250-300 miles per hour) without utilizing engines. Maglev technology is in use for passenger transport and will become an important mode of freight transport in the future because it is fast, quiet, and cost effective, and it reduces dependence on fossil fuels.

Rapid Rail Freight

The rapid transport that is currently being developed for passenger transit could be adapted for rail freight as well. High- speed freight trains will increase the rail system’s competitiveness since they will not have to be shunted aside to make way for high-speed passenger trains. Future needs for rail freight will be discussed in detail in Chapter 19.

Freight Pipelines

Freight pipelines are used to move encapsulated freight underground. The wheeled capsules can use a variety of energy sources for propulsion. In a pneumatic system, air pressure from booster fans or pumps moves the wheeled capsules through the pipelines at a speed of 6-15 meters per second (20-50 feet per second). Linear induction motors provide an electromagnetic propulsion system similar to those used in roller coasters and high- speed trains to move the freight capsules. Hydraulic systems use capsules that are suspended in water within the pipeline and these can move at a speed of 1.8-3 meters per second (6-10 feet per second).

Freight pipelines are already in use in numerous places, and are especially useful for the transport of components within factories or raw materials in mining operations.They are useful for transporting coal, solid waste, hazardous waste, mail, parcels, and perishables. They can pass through bodies of water and are relatively simple to design and operate. By taking freight off the roads, underground freight pipelines can reduce pollution, road damage, accidents, and traffic congestion.They are not affected by the weather; they do not affect nor are they affected by surface transport. In short, they can potentially save time, lives, fuel, money and the environment—the key ingredients for future transport.

One hundred years ago, the technologies we utilize today only existed in the imaginations of those inventors and innovators who dared to dream of them. When we look at the future, we cannot be afraid to think big. We cannot confine our thinking to the standard trucks, planes, ships, and trains of the present day. Will we be able to “beam” goods from one location to another, or build a trans-oceanic bridge? The only limit to freight transport in the distant future is our imagination.

The invention of imaginative new transport modes will not wait 50 years–it has already begun. In the future, highways in the sky could be crowded with personal air vehicles (PAVs). The Carter Copter is a helicopter-like PAV with a large rotor on top and small wings which double as fuel tanks. Propulsion is generated by a secondary propeller at the plane’s rear. It can fly 804 kilometers per hour (500 miles per hour) at an altitude of 3,048 meters (10,000 feet). The Skycar is a small personal vehicle that can travel at a speed of 482 kilometers per hour (300 miles per hour), at an altitude of 6,096 meters (20,000 feet), and that features vertical take-off and landing. The Spring Tail uses two large ducted fans, which help it fly for over two hours at 144 kilometers per hour (90 miles per hour) at a hover ceiling of 1,097 meters (3,600 feet). In order to coordinate all these flying vehicles NASA is already developing a “highway in the sky” traffic management system to guide pilots through the air.

New technology and new transport machines clearly present new challenges to governments and regulatory authorities, who must take a strategic look at their pace of technology adoption. New transport technology will require the adaptation of existing infrastructure and the construction of new facilities. Just as seaports have to undertake dredging projects to accommodate the next generation of containerships, so airports have to choose whether they will upgrade to accommodate the A380. Those airports that do not do so are likely to become feeder airports that are served by smaller planes. Such will be the development of hub and feeder systems for all transport modes.

We will see increasingly interconnected transport networks, in which freight moves seamlessly across national borders in any transport mode. If governments are intentional about fostering new transport technology, then we will see the emergence of new multi-modal transport hubs that combine sea, air, road, and rail transport. Africa is home to a number of yet untapped possibilities for multi-modal hubs, such as Durban, South Africa; Mombasa, Kenya; Accra, Ghana; Douala, Cameroon; and Djibouti.

These new multi-modal hubs will also draw on the resources of major new transport networks. The Asian Highway, for example, involves 32 countries and a network of 140,000 kilometers (87,000 miles) of highways. The project was initiated in 1959 and is coming closer to completion now that it has been agreed upon by all participants. A Trans-Asian Railway (TAR) network is also in development. Like Europe’s rail network, which will be discussed in Chapter 19, the development of this network faces challenges such as governmental cooperation, differences in standards, and differences in levels of technical development between existing railways. TAR routes currently cover 81,000 kilometers (50,331 miles) in 26 countries.

Logistics is used to link complex global supply chains that demand extensive geographical coverage and seamless multi- modal transport. As globalization runs its course, the efficiency and capacity of transport links will more than ever before determine a country’s prosperity and economic competitiveness. When a country equips itself to take advantage of these new technologies, it opens up new opportunities for economic mobilization. But the slower the adaptation to these new technologies (as well as the IT tools that will be discussed in the next chapter), the slower the growth in economic competitiveness.

1 Lynch, “Neurotechnology and Society (2010-2060),” 230-232.

2 Ibid., 229-233.

3 Arend, Bruns, and McCurry, “The 2004 Global Infrastructure Report,” 580.

CHAPTER 17

THE FREIGHT LOGISTICS PROVIDER OF THE FUTURE:

IN THE BUSINESS OF INFORMATION?

“These days, unless you devote an enormous amount of time to anticipating the future, you won’t have any future.”

Ron Chernow

In Chapter 12, I predicted that the traditional freight forwarder as we know him would likely be extinct in five to seven years. Is this prediction as bleak as it sounds? Is there any hope for the small-to-medium-sized freight forwarder? In this chapter, we will explore the coming transformation of the market and identify some strategies that will help small to medium-sized freight logistics providers compete and retain their market share.

The positioning of the various players in Figure 17.1 (page 230) merely indicates their relative sizes. But size is not the determining factor in a company’s success or failure. In the future, no single group will dominate. Instead, each service provider will have a niche market that is determined by his size and reach. Even small freight logistics providers can retain their market share as long as they provide good service with modern logistics tools. They will of course have to deal with a number of challenges: the stakes are higher than ever before; 3PL-customer relationships are evolving; there is more dependence on the integration of processes; FLPs will be required to provide broader-based solutions; and the value of information is increasing. But with continuing self-reinvention, FLPs will be able to compete by positioning themselves for a changing marketplace. Following are some basic keys to survival for the small to medium-sized freight logistics provider.

Personalized Customer Service

Freight logistics providers who can do more than simply compete on price have established special services and unique relationships with their customers. But what will differentiate them from multinational 3PL giants, who can also compete on price and create special services for their customers? In many cases, the differentiating factor is close relationships and the individualized service that comes from a company with a smaller scope and a dedicated customer focus. The forwarder is no longer just the intermediary; he marries the carrier’s interests with customer needs in order to produce an all-around beneficial and lasting relationship. So, FLPs must be willing to specialize, individualize, and personalize their services according to customer demand. In the future, the business processes of FLPs and their customers will become even more closely integrated than ever before. In addition to fostering close personal relationships, FLPs must continue sharpening their skills and improving their service offerings in order to add value to their customers’ supply chains. The day that the customer knows more about logistics than the FLP is the beginning of the end of their relationship.

Another test of FLPs’ competitiveness is whether they can bundle a number of logistics services. A customer should ideally only need to use the services of one 3PL provider, not several. For many customers, the ability of an FLP to seamlessly integrate a number of services is a defining requirement. In carrying out this integration, FLPs must provide perfect information that is accurate, actionable, and available in real time.

Take Advantage of Globalization

Globalization is underway, and its defining characteristic is increased geographic reach. As the global market expands, so the value of transport increases. Just think for a moment about the number of goods and services that customers now expect to be delivered to their doorsteps. All these rely on connecting an entry point to a network, and through inter-related routes in that network, to a desired exit point.The transport network is therefore of increasing value.

This global expansion, combined with the need to outsource all non-core competency supply chain tasks, means that there will be increased dependence on FLPs to reach far-off markets. 3PL users who are under increased pressure to reduce costs and improve customer service will want to concentrate on what they know and do best (usually tasks like research and development and/or marketing), and leave everything else to FLPs. These companies source their supplies based on cost and quality, not supplier location, and they constantly redesign their supply chains for greater efficiency and effectiveness. FLPs who cater to these companies must perform similar improvement initiatives on a regular basis in order to remain competitive.

As globalization leads to the “flattening” of the world 1 , category (1) and (2) companies already have, or will soon, have a presence on all six continents. And it will become easier and easier for medium-sized FLPs to go global by locating in other countries. The process of “going global” (both by customers and the FLPs who serve them) will be carried out according to some basic criteria. A company will choose to operate in new countries only if these countries meet their standards in the following categories:

• Lack of prohibitive bureaucracy

• Modern transport and communications infrastructure

• Ease of currency remittance

• Use of technology

• Other trade logistics factors identified in Chapter 14

As Chapter 14 made clear, countries that do not upgrade their services in these areas will miss out on a global scale.

Alliances and Networks

Global reach is not limited to multinational 3PL giants. Small to medium-sized FLPs can also attain global reach, but it will more often come about through networks of agents and the formation of alliances. As mega 3PLs merge and gain global dominance, the market share for small to medium-sized freight forwarders shrinks. Networks of small to medium-sized FLPs are growing, with many specializing in a certain region or product line (i.e. perishable logistics). These networks are an effective way for smaller players to provide global service and, ideally, maintain a foothold in the market in the long run. Just like supply chains rely on close cooperation between partners, so alliances and networks of FLPs require constant communication, collaboration, and information sharing. The network that does not maintain close relationships by meeting at least once per year is doomed to extinction.

Another example of an alliance is the professional industry association. National and international organizations such as the International Federation of Freight Forwarders’ Associations (FIATA) and The International Air Cargo Association (TIACA) provide an important network for the FLP, because he can draw on the resources and business leads found among fellow freight professionals all over the globe. The role of these associations is discussed in more detail in Chapter 20.

Specialize in the Business of Information

It is clear that today’s FLP is no longer just a link in the supply chain, but has become a key player in the value chain. Entrusted by customers with precious and valuable cargo, the FLP must guarantee its well being. In this role the FLP is responsible for providing the customer with real time information about the state, stage and schedule of the goods at any given time and place (i.e. stock levels, status of shipments, choice of carrier, etc.). But does that mean that FLPs are just in the business of management and communication of information? Is information management as important as skill in the physical movement of goods? Information management is indeed the new face of the FLP, for real time, accurate, customized communication of information is paramount to the entire business. Logistics today is essentially the efficient management and handling of information at all points in the supply chain, just as much as the physical movement of goods.

New Tools

Being in the business of information requires expertise in handling that information. Chapter 12 discussed the many technological tools available to FLPs for use in engineering their customers’ supply chains. We looked at the importance of technologies that manage warehousing and distribution, track and trace, supply chain events, export/import, freight forwarding, customs clearance, and transport (i.e. routing, container stuffing, etc.). In terms of providing real-time visibility to customers, shipment tracking will be one of the most important services that FLPs can offer. Bar coding and global positioning systems have both been used for asset tracking. The newest trend, however, is radio frequency identification (RFID), also discussed in Chapter 12. RFID is being standardized on a global level, and it is in use across a wide number of industries. Wal-Mart and the US Department of Defense, for example, have both mandated that their suppliers utilize RFID tags on all goods. RFID provides the uninterrupted tracking of goods in transit, it requires fewer personnel, and it tells managers where their entire inventory is at any given moment. With RFID, container movements are cheaper and shipments are tracked with 100 percent accuracy. The accurate and timely information provided by RFID systems means increased supply chain visibility and efficiency.

If suppliers all over the world are being told to implement RFID technology, then FLPs will have to follow soon after. It is quickly becoming the world’s dominant technology for asset tracking. Because it does not require line-of-sight to be read (like bar codes), and because it helps eliminate human interference in cargo movement, RFID will eventually replace bar coding. FLPs will be forced to invest in their businesses to become RFID-compliant. And fortunately, the prospects for global standardization of RFID are improving as the tags get cheaper and more people recognize the value of the tool.

Tracking a shipment across global supply chains is important, but it is only one aspect of the trade environment of the future. In the coming years we can expect to see the complete integration and automation of all trade processes and procedures. This will include paperless and single-document trade and, significantly, the legal recognition of e-signatures as valid for international commerce. True paperless trade will not be enabled until the e-signature is recognized. Eventually, this e-signature will act as a kind of personal identification number for an individual, which will be utilized in a standard fashion across all commercial transactions. Individual businesses, too, will be assigned company identification numbers to use in electronic commerce. Freight logistics providers who want to survive and thrive in this environment will have to be prepared to participate in revolutionary new technological systems, the likes of which are unimaginable at this time.

1 Friedman, The World is Flat.

CHAPTER 17

NEW FUELS FOR THE FUTURE

Joining globalization atop the list of the most influential forces shaping the world is the supply of oil. For years, geologists have been warning us about the finitude of fossil fuels. Because the peak of oil production will likely be reached within this century, we urgently need to learn how to live without them. The end of the age of oil will clearly have major consequences in all areas of life, but this discussion focuses specifically on the future of oil as it relates to global transport and freight logistics providers.

Data on world oil production and reserves is generally of a poor quality, due to problems with data collection and the fact that some governments are unwilling to divulge accurate data. It is therefore difficult to assess the exact amount of oil left on Earth and how long it will last. What is clear is that we must immediately start using other energy sources, as forecasts indicate that supplies will begin to run out sometime in this century. In 1956 Shell geophysicist M. King Hubbert predicted that US oil extraction would peak around 1970 and decline thereafter. Though Hubbert’s theory was not widely accepted at the time, what he predicted came true in 1970. Hubbert’s theory also assumes that once half the world’s oil supplies are consumed, existing oil fields will become exhausted faster than new oil fields can be tapped. This is a sobering prospect, one that should encourage the increased exploration of alternative energy sources.

If human demand for oil decreased along with supplies, then there would be nothing to worry about. However, the problem is that demand is rising due to increasing living standards, industrialization, manufacturing, and private automobile ownership. No longer is this rapid oil consumption characteristic of only the United States or other industrialized nations. On the contrary, developing Asia is displaying a tremendous appetite for oil, as the middle class grows and oil-consuming activities such as car ownership, indoor heating, air travel, and electricity increase. The two key energy consumers to watch are India and China, which have a combined population of about 2.3 billion. China and India are frantically trying to secure contracts with suppliers for their long-term oil and natural gas needs, for their energy demands are expected to more than double by 2025. 1 This demand is already apparent: between 2003 and 2004, China’s oil consumption jumped 15.8%, making it the second largest oil consumer in the world. 2

When supply remains steady and demand increases, oil prices skyrocket. The price of oil is extremely volatile and can change quickly, not because of fears that total world supplies will run out, but because of short-term risks to current supplies. These risks can be caused by political conflicts and events in oil-producing countries (especially Nigeria, Venezuela, and the Middle East), pipeline problems, refinery bottlenecks, technical production factors, or market factors. The past 50 years have seen numerous disruptions to the oil supply and have shown that jumps in oil prices can hurt economies by slowing growth, causing inflation, and cutting into profits. Not only are oil prices more volatile than prices for other commodities—the effects of rapid changes in oil prices are much farther reaching than the effects of price changes for other commodities.

Much of the world’s oil is sourced from the Middle East, and since the 1970s, the region’s geopolitical issues have played a major role in determining global oil prices. A number of oil shocks related to Middle East conflicts have disrupted supplies. The 1973 oil embargo by Arab nations quadrupled prices to $49 a barrel (as expressed in 2004 prices) and sent the US and global economies into recession. Then, in 1979, the Iranian revolution almost eliminated Iran’s crude exports and brought oil to $83 a barrel (as expressed in 2004 prices).

One notable reaction to the oil crisis of the late 1970s was legislation known as the Corporate Average Fuel Economy Law.This legislation was introduced in the United States to decrease energy use, and it resulted in major fuel efficiency gains in automobiles.The spikes in oil prices in 2004 and 2005 likewise brought oil to record highs.We can hope that these spikes will similarly discourage reliance on traditional petroleum and encourage the use of alternative and renewable energy sources. High fuel prices present a challenge in countless ways, but they also present an opportunity for exploring new resources, increasing refining capacity, undertaking natural gas infrastructure projects, and developing biofuels and other renewable energy sources.

While other economic sectors (manufacturing, power, and households) have been successful in reducing their oil consumption, the transport sector is consuming an ever-increasing percentage of the world’s oil (Figure 18.3). On a positive note, high fuel prices catalyze the development of new transport technologies. For example, if oil remained at $30 per barrel, the development of new jet technology would be much slower. High prices and fears of shrinking supplies have spurred innovations such as building with lighter materials that decrease fuel consumption. However, the internal combustion engine can only become so much more efficient. In the future we will have to develop alternative, non- carbon-based, cost-effective fuels not just in aviation, but for all transport modes.

Solar power is a traditional, renewable energy source that will become a very important asset, as the sun provides unlimited energy. Solar powered transport is limited on land due to the weight and size of the batteries that store energy, but it has more possibilities for water transport. The weight and volume of the storage batteries can be handled by ships, which need weight for ballast anyway. What is more, boats do not have to deal with some of the other problems faced by solar-powered land vehicles, which would have to carry these batteries up hills, stop and start in traffic (which drains energy), and enter the shady areas under trees and buildings. Solar powered airships could also be useful for heavy lifts that need only travel short distances.

In addition to traditional renewable energy sources such as electricity and solar power, future alternative fuels might include hydrogen, biofuels, gas-to-liquids, and P-series. Hydrogen can be mixed with natural gas in internal combustion engines. It can also be used in fuel cells, which are batteries that combine liquid hydrogen fuel and oxygen (from the air) to produce electricity that powers a vehicle.

Two common biofuels are biodiesel (obtained from vegetable oil and animal fats) and Ethanol (grain alcohol, which may be used as a fuel in combination with gasoline). Both are beneficial because they are environmentally friendly and can be blended into conventional gasoline and used in today’s engines. The price of biofuel production varies by country. In some places it is still much more expensive to produce than gasoline. In addition, the production of biofuels requires a tremendous amount of cropland. It is therefore difficult to estimate whether their development would be sustainable. The International Energy Agency estimates that over 50 percent of global transport fuel could be replaced with biofuels in the 2050-2100 timeframe, if programs were properly developed. Biofuel use could more than double by as early as 2010, pending the implementation of proper policies. 3

Using gas-to-liquids (GTL) technology, methane can be converted into a transportable, super-clean, non-petroleum diesel fuel. Diesel fuels that are derived from methane have environmental and efficiency benefits over petroleum-derived diesel. Another benefit is that methane is readily available in non-hostile locations such as Qatar and Australia.

P-series fuel is a non-petroleum liquid fuel, which is a blend of natural gas liquids, ethanol, and MeTHF (derived from biomasses such as paper sludge, wastepaper, and food waste). It can be mixed with gasoline in any proportion inside a fuel-flexible vehicle (one which is designed to run on gasoline, p-series, methanol, and ethanol).

When we are finally forced to use some of these substitutes for petroleum, we will be required to modify engines, batteries, and fuel distribution systems. Figure 18.4 provides an overview of some alternative fuels and their prospects for use in freight transport.

The transport industry is particularly sensitive to the price of oil and therefore must learn to cope with the challenge of high oil prices in both the short and the long term. In the short term, shippers using airfreight services must be prepared to pay fuel surcharges, even though airlines are undertaking some fuel saving initiatives (i.e. route and airport procedure optimization, better airspace design and management, and best practices for fuel and environmental management). Freight forwarders, too, are being exposed and made vulnerable in new ways. They must pay fuel surcharges to airlines up front, regardless of whether their own customers pay them on time. This precarious situation is leading them to make new and greater investments of time and money to better serve their customers.

Whether or not airlines compensate forwarders for this investment and vulnerability, fuel surcharges for airfreight are now an unavoidable fact. They present a challenge that is not going to disappear or fade away until we find a way to power air transport—the world’s fastest and most fuel-intensive transport mode—with something other than petroleum. Once the peak of world production is reached, we will find ourselves on a downward slope. As supplies become scarcer and demand increases, all petroleum-based transport will become more expensive, with the application of fuel surcharges to all modes (not just airfreight). Just as automobile drivers in many countries now have to pay record prices for gasoline, so carriers, FLPs, shippers, and ultimately, consumers, will have to adjust their mindsets to the idea of paying higher prices for goods and their transport due to higher fuel costs. This scenario will last until we develop transport that is fast, reliable, and which, above all, does not rely on petroleum.

1 US Energy Information Administration, “International Energy Outlook,” 7.

2 BP, “Statistical Review of World Energy June 2005.”

3 Fulton, “Biofuels for transport: A viable alternative?” 45.

CHAPTER 19

RAILWAYS: TRANSPORT SOLUTION FOR

AFRICA AND THE MIDDLE EAST

“Neither a wise man nor a brave man lies down on the tracks of history to wait for the train of the future to run over him.”

Dwight D. Eisenhower

Before the invention of the steam locomotive and the spread of railways, overland travel and transport was an arduous undertaking. In the eighteenth century, the main northern road linking England and Scotland had potholes so large that men and horses were said to have drowned in them. Similarly poor roads in North America meant that instead of one national economy for the new nation, several regional economies existed in different parts of the country. 1 Rivers were not navigable for long distances, and traveling even 20 miles from home was a rare and difficult task. Primitive rail transport did exist in the form of horses pulling carts along grooved tracks or rails, however it was mostly used for the transport of commodities. Similar rail cars were also used in underground mines, and even as early as the fourteenth century in Germany, they were used to take coal to ports.

However, the Industrial Revolution of the eighteenth and nineteenth centuries revolutionized rail transport. In the early nineteenth century George Stephenson invented a steam-powered locomotive that pulled 30 freight and passenger cars at a speed of 19 kilometers per hour (12 miles per hour). By 1830, he had developed the Rocket locomotive, which traveled at 46 kilometers per hour (29 miles per hour). The steam locomotive was the catalyst for the growth of railways in England and then Europe and North America. In the early 1800s, as steam-powered rail transport became more common, North American train companies struggled to compete with other transport modes, such as toll roads, canals, and river boats. Often local governments would help finance local railways, which were linked to major transport arteries to ensure that local produce had a means of transport to outside markets.

By 1840, the United States had 4,600 kilometers (2,858 miles) of railways, spurring the growth of towns and cities in rural areas that had previously been inaccessible. Britain had 2,400 kilometers (1,491 miles) of railways and the European continent had 1,500 kilometers (932 miles). 2 North America’s first transcontinental railway was completed in 1869. Eventually the local railways merged into national networks, connecting small towns to big cities.

Because shipping goods by rail was faster and cheaper than previous forms of overland transport, railways facilitated the trade, commerce, and industrialization that had been catalyzed by the Industrial Revolution. New industrial trends required a cost-effective way to transport raw material for production and finished goods from factories to consumers. Railways met this need and enabled the spread of new factories that utilized cheap mass production techniques. Railways also gave farmers a reliable way to transport their produce to new markets and earn a living, while simultaneously helping create new settlements and cities in previously hard-to-reach areas. With the help of the railways, the United States’ many regional economies began to merge into one national economy. 3 In Russia, the Ottoman Empire, Japan, China, and India, railway networks helped central governments and mother countries exercise their sovereignty over remote territories and colonies. They encouraged the economic and administrative development of these territories by enabling transport and communication.

Railways reached their peak between 1910 and 1914, before the impact of cars, trucks, and planes. However, once trucking took over, it could not be stopped. In the 100-plus years since the spread of the railways, overland transport by truck has come to take the dominant share of freight transport. North America and Europe, especially, suffer from congested highways. Most governments now recognize the need to move freight off the roads and onto rail. Railways are best suited to bulk and containerized freight traveling 500-5,000 kilometers (300-3,000 miles). Below these distances, road transport is more economical, and above them, cargo usually travels by sea.

One of the best reasons to favor rail transport is that it can achieve energy savings and reductions in air pollution. What is more, it reduces road congestion by taking traffic off the roads. One inter-modal train can carry as much freight as 280 trucks. 4 Compared to highways, rail transport is far more economical as a long-term investment: railway lines cost less to build and maintain, and they last longer. This means a greater long-term payback and a better investment for the country. Rail is also more fuel efficient: freight trains are three or more times more fuel efficient than trucks and they are therefore responsible for less greenhouse gasses. Fuel efficiency on US railways has steadily improved, increasing 74 percent since 1980. 5 Rail freight offers reliable and consistent departure and arrival times (which allow better planning for businesses), high maximum payload capacity, better security, no danger of being slowed down by road traffic, and less direct exposure to spikes in fuel prices.

The European Example

In the post-war period, infrastructure development in Europe was highly uneven, especially in Western Europe. Priority was given to highways, and today Europe is paying the price: road traffic is increasing, while the railways’ share of freight transport declines. Between 1970 and 2000, European road transport grew from 500 billion tonne-kilometers per year to almost 1,400 billion tonne-kilometers per year. Rail freight fell from 300 billion tonne- kilometers per year in 1970 to 200 billion tonne-kilometers per year in the mid 1990s, rising only slightly above that level by the year 2000. 6 Not only did tonne-kilometers fall—the rail network contracted by 4 percent in the 1990s, and by 1999 was less than 154,000 kilometers (95,691 miles). The road network had grown more than 25 percent longer by 1999. 7

The European rail network must overcome various barriers to interoperability. A train attempting to cross from one country to another could encounter differences in voltage, signaling systems, load limits, working practices, legal requirements (i.e. number of drivers required on the train), axle requirements, and gauges.With two- to three-hour border crossings, rail freight moves very slowly. In fact, its average speed for international transport fell below 18 kilometers per hour (11 miles per hour) in 2002, 8 obviously leading many customers to choose road transport for their cargo.

When 23 countries have developed their own national networks, systems, and technologies, it is not easy to integrate them into one seamless network. However, the need to increase the speed of rail freight across an interoperable network is urgent, for the enlargement of the European Union (EU) has brought increasing volumes onto the roads, and road freight is forecast to increase in the next 10 years. 9 Germany, Austria, Switzerland, and the Czech Republic have responded by enacting road tolls for trucks.

In the EU, railways are being organized into separate units for infrastructure management, freight operations, and passenger operations. As government monopolies in these three areas are broken up, rail freight will become more competitive and its modal share will increase. Germany and the UK have led the way in liberalization efforts, but other countries are following suit. The European Commission (EC) has introduced three Railway Packages designed to deregulate national railway companies in each member country; implement common rules for safety; guarantee interoperability; upgrade infrastructure; and create a continental rail network that facilitates seamless cross-border traffic. The European Railway Agency was created to offer technical support for railway security and interoperability. An EU-wide rail traffic management system is also being developed. The European Rail Traffic Management System (ERTMS) has three components: ETCS (European Train Control System), GSM-R (a radio system for voice and data communication), and a traffic management arm.

There are major obstacles to be overcome in the pursuit of a trans-European rail freight network. Accession countries in Eastern Europe have poorly developed infrastructure and bulky state-owned railway companies, both inherited from the Soviet era. Other countries have been resistant to orders that they privatize state-owned railway companies. These companies have a historical public service obligation (job creation), so privatization attempts are generally met with strong labor opposition.

The best long-term hopes for European rail freight are long distance transport (especially from Scandinavia to southern Europe), and combined transport, whereby, for example, trucks are placed on trains for transport across the Alpine sector. Another important trend will be rail freight from Europe to Asia on the trans-Siberian Railway. In 2005, the German company Railion started operating a train from Germany to China twice a month. It predicts an annual freight capacity of 2,500 containers carrying 50,000 tons. Outbound from China, freight consists of electronics, appliances, textiles, and minerals. Freight going into China is mostly raw materials, and some cargo is distributed in Russia along the way.

If rail freight is to become more competitive, then by 2030, the trans-European rail freight network should have the following characteristics:

• dedicated high-speed freight lanes

• improved service quality; non-discriminatory access for private operators who hold a market share of 30-40 percent

• rail links connecting western Europe to the accession countries

• an end to border problems

• trains that average 80 kilometers per hour

• the 98 percent reliability that trucking currently provides

Regional Proposals

Rail freight is the transport solution of the future for a number of reasons. It alleviates road congestion, it is environmentally friendly, it costs less to maintain than road networks, and its infrastructure has a longer life span than roads. Rail is a cost-effective way to transport high density, low value commodities in bulk over long distances. North American rail freight has a larger modal share than European rail freight (41 percent in 2000, compared to rail freight’s 8.1 percent modal share in the same year in the EU), but it has not yet surpassed road transport as the dominant mode. 10 In addition, while it is seen as an example of rail freight at its best, the present-day North American railway network is not a model for this discussion. In North America, freight services are provided by six principal railways and many regional and local railways, all owned by private investors, not the government. Moreover, the network links only three countries (Mexico, the United States, and Canada). We are concerned with networks that link a large number of countries (as in Europe), and situations where the infrastructure is owned by national governments and rail service is operated by private companies, which is Europe’s present goal. Therefore, as we examine the possibilities for rail networks in the Middle East and Africa, it is helpful to keep the example of Europe in mind, especially as it takes important steps toward deregulation and the creation of an interoperable, trans-continental rail freight network.

A Middle East Rail Network: Building from the Ground Up

In much of the Middle East, railways were never built: Yemen, Kuwait, Oman, the United Arab Emirates (UAE), Qatar, and Bahrain lack any functioning rail transport for freight or passengers. The latter five countries, along with Saudi Arabia, make up the Arabian Gulf Cooperation Council (GCC), which has initiated a feasibility study for a regional rail network. Saudi Arabia is undertaking the study, which will include bidding proposals. As no railways exist outside of Saudi Arabia, the GCC is literally starting from scratch. This means that its new railway network can build on best practices and become the most advanced, efficient, and well-integrated network in the world. It could link all major capitals and even use high-speed technologies such as magnetic levitation. There are two proposed lines.The first, stretching 1,970 kilometers (1,224 miles) would begin in Kuwait and continue to Saudi Arabia, Bahrain, Qatar, and the UAE. The second line would run from Kuwait to Saudi Arabia and the UAE, ending in Oman and stretching a length of 1,984 kilometers (1,232 miles).The network is expected to cost US$6 billion.

Saudi Arabia is upgrading its own railway network through the construction of a north-south land bridge across the peninsula. The line will start at Jubail Industrial City in the East, connect to Dammam’s King Abdul Aziz Port on the Arabian Gulf, pass through Riyadh Dry Port, and extend to Jeddah Islamic Port on the Red Sea. The project involves constructing 1,000 kilometers (621 miles) of new railway track, including passenger routes, and upgrading the Riyadh-Dammam link. Saudi Arabia, as the largest member of the GCC geographically, will need this land bridge if it is to take advantage of an GCC-wide rail network.

Outside the GCC, some Middle Eastern countries have existing rail lines. If these networks were upgraded, extended, and linked to the GCC network, the region would achieve tremendous overland connectivity. The network could continue out of the GCC into Jordan, Syria, and Turkey, which would connect it to Europe and Central Asia.

The importance of a rail link between Europe, the CIS, and the Middle East cannot be overstated. While many of the goods transiting the Arabian Gulf region for onward service to Europe and Central Asia are perishables and consumer goods that are better suited to air transport, this overland route will facilitate bulk trade in all directions. Iran’s rail link between Bafgh and Mashhad (upgraded in 2005) illustrates the importance of these rail connections—because the network extends all the way to Bandar Abbas on the Arabian Gulf, it may become the best way to transport oil from Kazakhstan to world markets.

While most oil-rich GCC nations are capable of investing in such a capital-intensive project, not all of their Middle Eastern neighbors have the same resources. Though tremendous resources exist, there are likely to be squabbles over who will pay for what. If these old rail networks sit and decay further, the region will waste a good opportunity for increased trade flows and investment opportunities. On the other hand, if each country upgrades its rail networks independently, the region will end up with a patchwork of railways that are not interoperable (similar to what happened in post-war Europe and post-colonial Africa). Governments of the Middle East should not wait for this scenario to happen. Instead, they must look at what will be best for the region and harmonize their efforts to create a seamless regional network.

MIDDLE EAST RAILWAYS

From Cape to Cairo: The Need for a Pan-African Railway Network

Colonial rule left Africa with a large number of fragmented rail lines, which were then damaged by decades of armed conflict and mismanagement. African railways face a number of challenges, in addition to the lack of interoperability caused by different gauges in different countries: declining traffic and revenue, a lack of market orientation, poor service, high loss-making passenger services, poor maintenance, overstaffing, a lack of technical and financial discipline, and financial losses. If they are to live up to their potential in fostering inter-African trade, the railways need to be upgraded, restructured, opened to private investment, and linked to form a Pan-African network. Reliable rail links, especially to seaports, would give African goods a faster route to world markets and increase the export competitiveness of landlocked countries. The continent has tremendous natural resources; the most cost effective way to transport them would be in bulk, over the railways. This would be cheaper than road transport and it would help roads last longer, for they are already in disrepair, and heavy rainfall exacerbates the problem.

The implementation of a Pan-African railway network would require an unprecedented amount of inter-governmental cooperation and the linkage of networks of various gauges. Mines would have to be removed and infrastructure reconstructed after damage by war. In fact, many railway lines are over 100 years old, and their trains are not much younger. Finally, there is a need for privatization and restructuring of state-owned railways. Even South Africa, a country that is seen as a leader for Africa (Chapter 14), does not yet have a privatized rail service provider.

Dr. Bamanga Tukur, Chairman of the African Business Roundtable, has proposed a railway connecting Abidjan (Ivory Coast), Accra (Ghana), Lome (Togo), Cotonou (Benin), Lagos and Maiduguri (Nigeria), N’djamena (Chad), Khartoum (Sudan), Kampala (Uganda), Mombasa (Kenya), and Dar es Salaam (Tanzania), with a final link to the Tanzania-Zambia Railway Authority (TAZARA). 11 The TAZARA Railway was built in 1975 and covers 1,850 kilometers (1,150 miles) of 1.067-m narrow gauge track between Dar es Salaam and Kapiri Mposhi (Zambia), where it connects to the Zambia Railways system.

If the cities mentioned above were connected, and the following links were added, the continent would be well on its way to a comprehensive rail network.

• Libya is considering the construction of a railway from Tripoli to Nigeria (via Chad) and another to Sudan.

• Mozambique’s railways, which link Malawi and Zimbabwe to the coast, were damaged during the civil war. The line stretching from Mozambique’s Nacala Port to landlocked Malawi is being reconstructed, and the Sena line will bring coal from Moatize to the Port of Beira.

• Ghana has begun redevelopment of the 30-kilometer (18-mile) railway stretching from Accra to the port of Tema. Rail lines connecting Ghana and its landlocked neighbors (Burkina Faso, Mali, and Niger) would link them to the port of Tema.

• Ivory Coast and Burkina Faso jointly handed over control of the Abidjan-Ouagadougou railway to a private operator in 1994.

• The Benguela link was originally built to transport agricultural exports from eastern Angola and mining exports from Zambia and southern parts of the Democratic Republic of Congo. However, it was poorly maintained during final years of Portuguese rule, and then targeted during the Angolan war of independence and ensuing civil war. Angola and Zambia signed a memorandum of understanding in April 2005 to upgrade the Benguela Line and create a rail link between the two countries. Once the railway between Chingola and Solwezi is upgraded (within Zambia), it will link to the Benguela railway and carry copper exports from Zambia to the Angolan port of Luanda on the Atlantic Ocean. The Benguela Line could also enable copper exports from the Democratic Republic of Congo’s Katanga Province to be shipped out via Angola. Rehabilitating this line will help Angola become better integrated with the Southern African Development Community.

• The Southern African Development Community (SADC—which includes Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe) has an extensive railway network covering approximately 45,600 kilometers (28,334 miles). Ten of the railways form the SADC Interconnected Regional Rail Network, which has a total length of 33,593 kilometers (20, 873 miles) of standard-gauge railway. The railways are owned by their governments. South Africa’s Spoornet accounts for approximately 60 percent of the total IRRN route- kilometers.

The vision for African rail is a harmonized network that takes advantage of existing infrastructure and links landlocked countries to seaports. State-owned networks should be restructured and opened to private investment, following Europe’s model whereby governments own and maintain the infrastructure but private train operating companies provide passenger and freight services.

The biggest failure of the world’s railways is that they do not currently provide competitive transport services at affordable prices for the very freight for which they ought to be the most competitive mode.To clear this hurdle, governments must continue separating public service obligations and commercial imperatives in state-owned railway companies. Rail service providers must gain some degree of independence from government and must focus on being customer-driven, which means providing quality service at affordable prices. This also means divesting non-core businesses, rationalizing assets, discontinuing services on unprofitable lines, modernizing technology, and downsizing to produce more transport with less capital assets and less labor.

Despite the world having recognized the many benefits of rail transport, railways are still not as fully developed as other transport modes. Transforming rail freight into the transport solution of the future will not be an easy process. It is more realistic to think of the evolution of rail freight networks as steady progress, not as a “fast track” to booming volumes. Changing hundred-year-old railway companies that are actually government departments (who are expected to provide passenger and freight services at prices below cost) will take time; so will integrating regional networks so that freight can move smoothly across borders and not encounter delays due to different gauges or the need to add an extra locomotive driver. However, as pollution, highway congestion, and fuel prices increase, the need to create twenty-first century rail networks that are entirely different from those of the past will become even more urgent.

1 Steele Gordon, “The Golden Spike.”

2 Pacey, An Encyclopaedia of the History of Technology, 138.

3 Steele Gordon, “The Golden Spike.”

4 Association of American Railroads, “Railroads: Building a Cleaner Environment,” 3.

5 Association of American Railroads, “Railroads and Greenhouse Gas Emissions,” 1.

6 Eurostat.

7 Eurostat.

8 Eurostat.

9 Eurostat.

10 Eurostat.

11 “Tukur Advocates Rail Link Across Africa,” This Day (Nigeria), March 30, 2005.

CHAPTER 20

TRAINING AND PROFESSIONAL DEVELOPMENT:

THE CULTURES OF QUALITY, SECURITY, AND INNOVATION

The preceding discussions have made it clear that today’s freight logistics providers face daunting new challenges. If they are to be equipped to compete in the new global economy, they must be intentional about cultivating three unique cultures in their organizations: the cultures of quality, security, and innovation. As they evolve and take on new roles and responsibilities, national and international industry associations will play an important role in the long term process of cultivating these three cultures.

The Culture of Quality

Freight forwarding has been an historically easy business to enter. In many countries, the barrier to entry has simply not been tough enough—anyone with a little start-up capital can enter the profession. However, if we are to ensure the continuing integrity of the profession, we must raise this threshold. We must develop mechanisms to guarantee the competence of freight logistics providers (FLPs), to keep them accountable, and to provide a greater sense of security to their customers and supply chain partners. Developing these certification mechanisms and creating a culture of quality will require hand-in-hand cooperation with government.

First, freight forwarders should be able to provide services only if they are trained and certified. National associations should create standardized training and certification requirements for forwarders, and the government should endorse them. If doctors, engineers, and teachers require certification and proof of training, why not freight logistics providers? In Germany, Austria, and Switzerland, for example, young people who want to enter the freight forwarding profession usually complete a three-year apprenticeship and business administration program, followed by an examination. These training programs are not mandated by government, but they are encouraged. Switzerland’s Federal Office for Professional Education and Technology grants diplomas in International Freight Forwarding and Logistics. In Singapore, the government does not mandate training and certification but does help by subsidizing certain training programs. While training should eventually become a legal requirement, these examples from Switzerland and Singapore show us that there are some short- term steps that governments can take to facilitate and encourage the training of skilled freight logistics professionals.

Second, no business community should be without a world- class arbitration body or consumer protection board to deal with the commercial disputes that will inevitably arise from freight transactions. This may seem like a very basic concept, however in many countries these institutions are still not common.Where they do exist, they are time-consuming, cumbersome, and not easily navigable. This creates an atmosphere where incompetent FLPs are free to operate according to ambiguous rules and regulations, endangering their customers’ right to quality service provision.

Third, professional liability insurance should be mandatory so that FLPs are held accountable for their actions in case of professional errors and omissions (i.e. misdirection of cargo). Professional liability coverage is not usually mandated by government, even in highly sophisticated freight logistics communities such as Singapore, Switzerland, and Germany. However, these mature industries are self-regulating, in that forwarders understand the importance of holding insurance coverage and take the initiative to do so. (In fact, many national associations require that their members hold certain coverage amounts.) Forwarders in these mature industries understand the importance of professional liability insurance because their countries have in place expedient judiciary systems, a solid legislative framework, and reliable consumer protection boards. If an FLP’s negligence results in loss or damage to cargo, he is likely to be sued. However, in many parts of the developing world, there is no legislative framework to impose standards of customer protection and, therefore, to make insurance a must.

The Culture of Security

The complex issues surrounding cargo security were discussed in detail in Chapter 13.This is not a challenge that will fade with time. In fact, cargo security will have to become an even greater priority in the future. FLPs should be ready for the many new regulations that will likely be implemented in each country, and ultimately for the global security standards that will be implemented by a body such as the ISO. This means that to create a culture of security in the future, FLPs should be prepared for continuous investment and for the improvement and re-evaluation of security measures. FLPs, and not the government, should take responsibility for securing their supply chains.

The Culture of Innovation

In order to foster creativity and innovation, practitioners must periodically interact with academics, experts, and representatives of international governmental and non-governmental organizations. If they are to keep pace with global developments, industry players must be exposed to new ideas. This will come about through the public exchange of new information, opinions, and best practices.

The key entity in encouraging FLPs to implement these three cultures and preparing them for the challenges of the future is the national association. Some national associations are still merely social clubs. However, while fostering networking among members is an important part of their job, the most dynamic associations are those that provide real value to their members in the form of training, arbitration, standardization, classification, and benchmarking. This is in addition to the association’s traditional role as the industry’s voice at a governmental level. National associations can provide a wealth of resources.

Training: The vitality and viability of our industry depend on training and development. Because the industry changes so often and so quickly, training is foundational. FLPs require regular updates on changing regulations and conventions, documentation, security procedures, insurance, and trading conditions. As markets change due to the trade policies implemented by the World Trade Organization and by regional blocs (i.e. GCC, ASEAN, EU, NAFTA, COMESA, SADC, etc.), this need for training becomes even more urgent. The goal is to raise professionalism and quality consciousness, create better FLPs, and ensure that the industry is really as professional, efficient, and seamless as it claims to be. Certification: Freight forwarding should no longer be a business that just anyone can enter. The bar must be raised in the form of a training and qualification process that licenses freight logistics providers. National associations should partner with governments to establish these training programs and accreditation schemes for FLPs in their countries.

Arbitration: The resolution of disputes between members of a national association does not necessarily have to happen at the government level. The parties involved can save time and money by taking advantage of arbitration services offered by the national association, but only if these arbitration bodies are effective and have been carefully crafted according to global standards and best practices.

Innovation: The need for the exchange of information, opinions, and best practices often takes the form of debates, industry round-tables, and public forums. These are best facilitated by national associations who are working to ensure that new ideas are continually circulated in the industry.

Countries that do not yet have national freight logistics associations are at a major disadvantage, and forwarders in these countries should partner to develop such associations.Where freight logistics associations already exist, they must collaborate with governments to create a culture of quality and to achieve these three goals (among others): 1) professional training programs that are mandatory for licensing; 2) professional liability insurance that is mandatory for any company engaged in the profession; and 3) world-class arbitration bodies and consumer protection agencies that resolve freight logistics-disputes in an expedient manner. In sum, the national association must be responsible to members and responsive to the market. It must be ready for involvement in regional and international associations. It must communicate with the industry to discover what is required, and not be content with the status quo. If it does not do these things, it will do its members little good.

International associations are equally important to the cultivation of quality, security, and innovation in the industry. Not only are they powerful representatives for freight logistics providers on a legislative level, they are also good vehicles for importing and exporting best practices. Importing global best practices can help a country’s FLPs assess their own situation. They can then adapt these best practices to local requirements and find homegrown solutions to the challenges they face. Some degree of adaptation is necessary, for what works in one country may not work exactly the same way in another country.

Despite the best efforts of national and international associations, the onus for change ultimately lies upon government. While these associations can help cultivate professional FLPs, regulatory authorities must be open to accepting new ideas and international best practices. Maintaining the status quo in areas such as EDI, customs classification, and port technology will do nothing but wreak havoc on supply chains. National and international associations can make great strides in facilitating trade and transport when they are empowered to do so, but they are merely the catalysts.

CHAPTER 21

TRANSPORT LOGISTICS:

BUILDING ON A STRONG FOUNDATION

“History, in illuminating the past, illuminates the present, and in illuminating the present, illuminates the future. ”

Benjamin Cardozo

I hope it has become clear that there is much to be gleaned from history that can help us face present and future challenges. Some basic guiding principles can be extracted from our examination of historical logistics projects.

The Conveyor Belt

General William Tunner carefully designed the Berlin Airlift operations so that cargo would move into the city as if on a conveyor belt. Thanks to his leadership, West Berlin was supplied with 2.3 million tons of food and other supplies while otherwise cut off from the outside world. In the Panama Canal, too, dirt was transported out of the Culebra Cut so seamlessly that it may as well have been on a conveyor belt. Thanks to the foresight of John F. Stevens, who implemented a railway network and utilized new steam technology, 213 million cubic meters (233 million cubic yards) of earth were disposed of quickly and efficiently. Likewise, businesses today demand the rapid global transport of raw material for production, components for assembly, and finished goods for delivery to customers. As transport intermediaries, freight logistics providers play an essential role in ensuring that these supply chains move just as seamlessly as the conveyor belts of history.

Strategy and Planning

Hannibal had a clear strategy for crossing the Alps with his army of 37,000 men and supplying them with food along the way: he would send scouts ahead to discover what resources awaited them on the journey to Rome, and then take provisions by force from the towns they passed. Before starting the journey, he had to make calculations regarding how much to carry and how much to gather along the way. Allied planners spent two years getting ready for D- Day, even postponing the invasion when it seemed that the planned date was not optimal. In preparation for the construction of the Panama Canal, planners took months to upgrade infrastructure along the canal route (including housing, sanitation, public utilities, and a railway network).

The three-step project management process that I outlined in Chapter 14 is important for any organization attempting to implement something new. First, spend the majority of time planning and strategizing, not being afraid to make mistakes on paper. Second, implement the project as quickly and efficiently as possible. Finally, carefully review the project to see whether planning matched up with execution and what lessons can be learned. The review process should often be undertaken by an outside party.

Flexibility and Improvisation

It is essential to have a carefully planned strategy, but it is just as important to be ready to abandon it in the face of unexpected challenges. In projects like the relocation of Abu Simbel and the D-Day invasion, obstacles arose without warning and required risk taking and the willingness to abandon old plans in favor of last- minute options.

Visibility

In today’s complex global supply chains, customers want to know where their cargo is at all times, and freight logistics providers must be able to give them this information. Visibility was also important to the success of the Panama Canal’s construction. With the aid of a telephone network, managers were able to supervise the removal and distribution of spoil from an 80-kilometer (50-mile) long canal. Today, the technology has changed, but the principle remains the same: logistics managers must be able to obtain detailed data about any aspect of their operations at any given time. For an example of an utter lack of visibility and communication, we need look no further than the Stalingrad Airlift. This fiasco lacked these two important principles in both the planning and execution stages. During both phases, the senior official (Hitler) was deliberately kept uninformed of the gravity of the situation, leading to a tremendous loss of human life.

Coordinating Workers

Training employees to perform as a team was critical to the success of the Great Pyramid project. In fact, humans were found to be more malleable and trainable than animals in that situation, which called for the combined efforts of hundreds of men in order to move blocks weighing up to 50 tons. Hannibal, too, had to unify an army made up of mercenaries who owed him no allegiance, and then motivate them to cross the Alps with him.

I have also tried to identify a few of the global trends for which we must prepare in the coming years.

• Increasing volumes, highway congestion, and pollution confirm the urgent need to move cargo off the roads and onto other transport modes. This means major investments in rail freight networks as well as inland waterways (where geography permits). Governments must cooperate to create interoperable regional rail freight networks that facilitate the seamless cross-border movement of cargo. This is especially important if landlocked countries are to have a land route to world markets.

• Airfreight will grow two or three times as fast as surface freight and will be driven by consumer demand for quick delivery.

• Governments in the developing world will come to understand the importance of dismantling bulky, state- owned enterprises in favor of restructured companies that draw on the financial resources and best commercial practices of the private sector. Those governments that do not take these steps—and that close their countries off from international best practices and foreign investment—will find themselves economically isolated and stagnant. The private sector is willing to act and ready to invest; the onus will lie upon governments to give them the opportunities to do so.

• Developing Asia’s rising demand for oil and the uncertainty caused by regional conflicts will push oil prices to record highs. Freight logistics providers, shippers, carriers, importers, exporters, and consumers must become accustomed to paying more for transport until we develop sustainable, cost effective transport technologies that avoid fossil fuels.

• The forces of globalization are unstoppable, for better or for worse. Neither will outsourcing cease any time soon; instead it will continue to spread to previously untapped markets. If freight logistics providers are not prepared to actively participate in global supply chains, they will not last long.

• Mergers and acquisitions will continue to strengthen multinational 3PLs and integrators, who will become even more powerful with even wider geographical reaches. But for small to medium-sized freight logistics providers, alliances (through networks and agency agreements) will be key to gaining global reach without actually having a physical presence on all continents.

As a freight forwarder I am especially concerned with my specific segment of the wider logistics industry. Freight forwarding has been condemned to extinction many times before, but it is still alive and kicking because it has learned to adapt and evolve. To survive the challenges of the future, it must continue to do so. Freight logistics providers will remain the architects of global transport, but in order to survive they must be flexible and attentive to industry needs (i.e. manufacturing trends like product customization).

Throughout this book, we have found it helpful to divide history into distinct eras. Of course, such distinctions can be made based on a number of historical trends. Globalization expertThomas Friedman divides history into three periods. During Globalization 1.0 (approximately 1492-1800), countries and governments led the way in globalizing the world by virtue of their superiority in areas like horsepower, wind power, and steam power. This was followed by Globalization 2.0 (approximately 1800-2000), in which multinational companies acted as the key agent of change in integrating the world.Their expansion was facilitated by decreasing transport and communications costs. Finally, we are in the midst of Globalization 3.0 (approximately 2000-2040), in which individuals are becoming globalized and newly empowered to compete on a global level due to new applications and the “global fiber-optic network that has made us all next-door neighbors.” 1

Neurotech “futurologist” Zack Lynch divides history into a series of techno-economic waves (i.e. mechanization, industrialization, the use of oil for transport, and information technology) that made it possible to solve problems that were previously thought to be intractable. Techno-economic waves, he says, have had profound effects on our economy and society: “Because they embody a major jump up in productivity, they open up an unusually wide range of investment and profit opportunities, leading to sustained rates of economic growth.” 2

I too have attempted to divide history into distinct eras to better understand the trends and innovations that have led to the development of transport logistics, as it exists today (Figure 21.1). Each innovation on this chart led to higher levels of efficiency, geographic reach, and cost-effectiveness in transport logistics. Each innovation was one small step in the transformation of transport logistics.

The need to transform, to change and improve in fundamental ways, is a central element in the story of civilization, especially in the technological and economic spheres. 3 An obvious example of this trend is found in our discussion of the Industrial Revolution (Chapter 4). Before the 1800s, the dominant transport modes had been the same for centuries. Then, within 100 years, inventors created steamboats, railways, automobiles, and aircraft, all powered by new forms of propulsion like steam and internal combustion. Speed increased as well, such that trips that once took days now take only minutes. 4

However, this is not an idea that remains dead and lifeless in history. Freight logistics providers must continually apply the concept of transformation to their businesses. Enterprise transformation is defined as fundamental changes in relationships to markets, product and service offerings, market perceptions, cost pressures, and the processes associated with these issues. In order to accurately assess their current market positions, pursue desired changes, and survive these changes, companies must understand and support transformation. They increasingly should approach transformation in the context of IT solutions, though these require large investments and are only one small piece of the larger transformation puzzle. 5 In the past few years, we have seen some examples of transformation in the marketplace. Amazon and Wal- Mart both used IT to redefine book buying and the retail industry, respectively. UPS transformed itself from a package delivery company to a supply chain management provider. Motorola moved from selling battery eliminators, to radios, to cell phones. IBM shifted from selling computer products to providing integrated technology services. 6

Transformation is not limited to enterprises or to technological trends. It can also be applied to an economy. As we have seen, the economies that flourish are those that open themselves up to the outside world by lowering trade barriers and increasing opportunities for foreign investment. It has often been said that economic prosperity is not an accident. Governments must forsake their controlling postures and instead become facilitators who take a businesslike approach to economic planning. They have to start from scratch, look at what is unique to the country, and discover how income can be generated from those resources. Often, trade and transport links play a major role in capitalizing on these resources.

If the resource is tourism, then governments must facilitate it by, first, making the country’s attractions visible on a global level. Tourists must be able to travel to, from, and within the country by way of predictable, easy-to-use transport links. Entry visas must be easily obtainable, and the hospitality industry must be enabled to cater to tourists’ needs.

If the resource is a commodity, a certain natural resource, or perhaps a horticultural product, governments must facilitate its export by removing any bottlenecks that clog up the trade logistics chain. The resource or product must be transported unhindered to the countries of consumption. This calls for legislative changes, infrastructure upgrades, close cooperation among all players (i.e. growers, dealers, transport coordinators, carriers, etc.), and the right investments in roads, railways, seaports, and airports. If the export is to provide economic benefits to the nation, all of these must work in harmony and create a smooth route to world markets.

Not only are transport links important—freight logistics providers, as the architects of transport, can be a resource in their own right. In Dubai, the sea-air combined transport product has grown tremendously over the past few decades (Chapter 14). As a practitioner in the industry, I can say that the trigger for this development was the Government of Dubai and the late Ruler Sheikh Rashid bin Saeed Al-Maktoum, a leader who was truly receptive to change.

The twentieth century has produced a number of movers and shakers in government who have taken the lead and transformed their nations. As Prime Minister of Singapore from 1959 to 1990, Lee Kuan Yew transformed the economy and helped Singapore become one of the world’s most developed nations. Though it lacks natural resources, Lee uplifted it and created the foundation for sustained economic growth. He has often said that Singapore’s only natural resource is its people and their strong work ethic. Lee’s economic policies, however, were also clearly important, for they encouraged multinational investment (by offering tax holidays, for example) and helped Singapore become a strong business and logistics hub that has the region’s best transport and communications infrastructure.

Dubai provides another example. With oil quickly running out, the Al-Maktoum family diversified the economy and transformed Dubai into a business and tourist center and a logistics hub. HH Sheikh Mohammed bin Rashid Al-Maktoum, the Crown Prince, has been the first in the region to take a “big leap” approach. His exemplary business vision is based on not on tight control and regulation, but instead on facilitating growth and investment. The visions that have been realized by the leaders of Singapore and Dubai were not accidental. These leaders capitalized on their States’ unique attributes and achieved great success. Any nation can do this, as long as its leaders take a businesslike approach and keep in mind the big picture of what is best for the economy.

In all of the historical projects we studied, long-term visions like those of Lee Kuan Yew and the Al-Maktoum family had to exist before transport logistics experts could step in and do their work. Such visions are the foundations that must be firmly in place before today’s freight logistics providers can fulfill their true role as the wheels of global commerce.

1 Friedman, The World is Flat, 9-11.

2 Lynch, “ Neurotechnology and Society (2010-2060),” 229.

3 Rouse, “Stories of Transformation,” 17.

4 Ibid, 14.

5 Ibid, 11-13.

6 Ibid, 12.

SELECTED MILESTONES IN THE HISTORY OF

TRANSPORT TECHNOLOGY

10,000 BCE

Early sea-borne trade occurs when obsidian from the Island of Melos is carried to mainland Greece in log boats.

7500 BCE

Reed boats are developed in Egypt and Mesopotamia, while dugout canoes are used in northwest Europe.

6000 BCE

The Y-shaped tree bough with leather strung between the branches is used as a primitive sled.

5000 BCE

Reindeer pull sleds in northern Europe.

5000 BCE

The sledge is used in North America, northern Europe, Egypt, Assyria, and the Middle East.

4500 BCE

The earliest long-distance highway is built from Susa (present-day Iran) to the Turkish ports of Ephesus and Smyrna

3500 BCE

A set of wheels is added to a sledge in Erech, Sumeria (present-day Iraq). This is probably the first time an axle is used to hold up a set of wheels, although wheel-like rollers had previously been used under sledges.

3500 BCE

Paved or cobbled roads are built in Assyria and India to accommodate wheeled vehicles, which are usually pulled by animals.

3500 BCE

The earliest depiction of a sail was found on a vase near Luxor, Egypt that dates from this period.

3100 BCE

The earliest bridge is built by Menes (first king of unified Egypt) over the Nile River.

3000 BCE

Anchors made of heavy stones or weighted bags are used by the Chinese and Egyptians.

2613 BCE

The earliest known shipping document is an invoice documenting the shipment of 40 ships full of cedar traveling from Phoenicia to Egypt.

2600 BCE

An early hoist / crane is used during the construction of the Great Pyramid.

2300 BCE

The first canal is built by Egyptian King Pepi I. Ancient civilizations located near rivers (i.e. the Tigris and Euphrates Rivers, the Nile River, the Ganges River, and the Yellow River) are the first to realize the efficiency gains that can be wrought by linking rivers with man-made channels. As time goes on, boats are designed to fit both rivers and man-made canals.

2250 BCE

The first vehicle guideway is built of grooved stone wheel tracks sitting about five feet apart.

2180 BCE

The first tunnel of any importance is built under the Euphrates river by the Babylonians.

600 BCE

Metal anchors are in use.

400 BCE

The wheelbarrow is invented in China, however it does not reach Europe for another several hundred years.

Early CE

The Romans use cranes capable of lifting six metric tonnes.

1603

The earliest recorded railway is built in Britain, a two-mile-long line of wooden planks over which wagons with flanged wheels are pulled by horses. The railway is used to transport coal out of a mine.

1712

British engineer Thomas Newcomen builds the first safe, reliable steam engine.

1802

The first steam-powered boat, developed by William Symington, sails on England’s Forth and Clyde canal.

1802

The first steam-powered railway locomotive is built by Richard Trevithick in Shropshire, England. His second locomotive (1804) pulls 10 tons * of iron and five wagons. The wagons carry 70 men a distance of 15 kilometers (9.5 miles) at a speed of eight kilometers per hour (five miles per hour)—a load heavier than a horse could pull.

1819

The first steamship to cross the Atlantic is the Savannah , which sails from Savannah, United States, to Liverpool, England in just over one month.

1849

Ro-ro is used to ferry railway wagons across the River Forth in Scotland.

1851

Refrigerated railway cars are used to ship butter over long distances in the United States.

1857

The first railway shipment of refrigerated meat is sent from Chicago.

1865

The first railway boxcar is built in Pennsylvania (United States).

1875

The first refrigerated ocean shipment from New York to England is a shipment of chilled beef.

1876

The first practical, successful, lightweight, four-cycle internal combustion engine is produced by German engineer Nikolaus A. Otto.

1879

A refrigeration machine is fitted into a ship.

1881

The first semi-trailer is towed by a steam tractor. Steam-powered trucks are sold in France and the United States until World War I and are sold until the beginning of World War II in the United Kingdom.

1885

Karl Benz builds a two-seater tricycle powered by a four-cycle gas engine, which can be considered the first true automobile. It is patented in 1886.

1886

The first four-wheeled, gas-driven car with a four-stroke engine is built by Gottlieb Daimler and Wilhelm Maybach in Germany.

1898

The first truck with an internal combustion engine is built by Gottlieb Daimler, with Peugeot, Benz and Renault following soon after. With two- cylinder engines, these trucks can carry 1,500- 2,000 kilograms (2,204-4,409 pounds).

1903

The first sustained, controlled, manned, powered flight is made by Orville and Wilbur Wright in Kitty Hawk, North Carolina.

1905

The first airport is the Champ de Manouevres at Issy-les-Moulineaux, in Paris. It is used by Ernest Archdeacon to test his second glider. This aerodrome will later be the site of famous aeronautical events and the Paris heliport.

1906

The first Mack Trucks are built in Allentown, Pennsylvania (United States).

1910

The airplane is first used to carry commercial freight when a Wright Company plane flies from Dayton to Columbus, Ohio carrying 10 bolts of silk.

1912

The first ocean-going ship to be propelled by an internal combustion engine is the Danish Selandia.

1917

The first forklift is invented by the Clark axle manufacturing company in order to move material between various departments in its factory.

1920

The first six-wheeled truck is made by Goodyear, increasing the truck’s load area by using three axles on a rigid chassis.

1937

Malcolm McLean invents the container.

WWII

The US military begins assembling freight on pallets in order to facilitate efficient movement between airplanes, ships, trains, trucks, and warehouses.

1940

All-cargo airline service in the United States begins when United Airlines delivers mail from New York to Chicago and back using a Douglas DC-4 aircraft.

Post WWII

Advances in truck technology include pneumatic tires instead of full rubber tires, electric starters, power brakes, 6-cylinder engines, closed cabs, and electric lighting. The first modern tractor-trailer also appears.

1952

The Canadian Pacific Railway becomes the first railway company in North America to introduce inter-modal transport in the form of the carriage of truck trailers on railway flat cars (“piggyback”).

1955

The White Pass and Yukon Route Railway Company develops containers that hold five tons and measure six feet by seven feet by eight feet.

1955

A purpose-built container vessel called the Clifford J. Rogers is built in Vancouver by the White Pass and Yukon Route Railway Company.

1956

Sealand’s Ideal X is converted into a container ship.

1969

The Boeing 747, the first widebody aircraft, is introduced.

Early 1970s

Standardized unit load devices are developed for carrying luggage and cargo in widebody aircraft holds.

1972

Boeing’s new 747 Freighter features the first upward-pivoting aircraft nose door.

ABBREVIATIONS

3PL

4PL

ACI

AHS

AMS

B2B

CSI

C-TPAT

EDI

FDI

FLP

FMCG

GDP

GTL

ISPS

JIT

NGO

NVOCC

PAV

RFID

SCEP

SCM

SOLAS

TEU

ULD

VMI

WIG

third party logistics provider

fourth party logistics provider

Advance Commercial Information

automated highway system

Automated Manifest System

Business to Business

Container Security Initiative

Customs-Trade Partnership Against Terrorism

electronic data interchange

foreign direct investment

freight logistics provider

fast-moving consumer goods

gross domestic product

gas-to-liquid

International Ship and Port Facility Security Code

just-in-time

non-governmental organization

non-vessel operating common carrier

personal air vehicle

radio-frequency identification

supply chain enterprise portal

supply chain management

International Convention for the Safety of Life at Sea

twenty-foot equivalent unit

unit load device

vendor-managed inventory

wing-in-ground

Organizations

ASEAN

COMESA

ECOWAS

FIATA

GCC

IFRC

ISO

MERCOSUR

NAFTA

SAARC

SACU

SADC

TIACA

WCO

WTO

Association of Southeast Asian Nations

Common Market for Eastern and Southern Africa

Economic Community of West African States

International Federation of Freight Forwarders’ Associations

Arabian Gulf Co-operation Council

International Federation of Red Cross and Red Crescent Societies

International Organization for Standardization

Southern Common Market (South America)

North American Free Trade Agreement

South Asian Association for Regional Cooperation

Southern African Customs Union

Southern African Development Community

The International Air Cargo Association

World Customs Organization

World Trade Organization

GLOSSARY

Advance Commercial Information (ACI) Detailed data about imports into Canada that must be transmitted to the Canada Border Services Agency before the shipment’s arrival. Timeframes for reporting data vary depending on transport mode.

Automated Manifest System (AMS) US Customs and Border Patrol system that tracks detailed data on imports into the United States. Data must be submitted to AMS before arrival of the shipment.

automated highway system (AHS) Highway system on which specially equipped cars, trucks, and buses travel under computer control. The ultimate goal of an AHS is hands-free, feet- free driving.

B2B (Business to Business) A strategy whereby a company sells products or services directly to another company, rather than to consumers, often through Internet commerce.

biodiesel Biofuel obtained from vegetable oil and animal fats. Environmentally friendly and can be blended into conventional gasoline and used in today’s engines.

bricks-and-mortar Traditional “storefront” aspects of business including quality customer service, inventory management, and efficiency in shipping and delivery.

break-bulk cargo Loose cargo (i.e. cartons), which is stowed directly in a vessel’s hold as opposed to containerized or bulk cargo.

bulk cargo An unpacked commodity (i.e. grain, oil, ore).

clustering The practice of locating a business in or near a specific geographic area with advanced physical infrastructure and a concentration of innovative, similar companies, specialized suppliers, service providers, and skilled knowledge workers.

Container Security Initiative (CSI) US Customs and Border Patrol program that attempts to minimize the danger of container shipments entering the United States by deploying Customs officials in the world’s most important seaports. Officials carry out risk analysis and spot checks before containers are loaded onto US- bound vessels.

Customs-Trade Partnership Against Terrorism (C- TPAT) Partnership based on bilateral agreements between the US Customs and Border Patrol and individual participants such as importers, carriers, shipbrokers, shipping agents, freight forwarders, companies handling and warehousing goods, and manufacturers. Businesses voluntarily compile comprehensive self-analyses, complete a comprehensive questionnaire, and introduce programs to increase security within their supply chains. C-TPAT-participants receive expedited clearance in the ports of departure and in US ports of entry, as their consignments are not considered a potential threat.

electronic data interchange (EDI) Systems that allow computers to conduct business transactions over telecommunications networks. EDI is an electronic commerce technique for re-engineering trade processes, and it is especially useful in streamlining customs procedures.

ethanol Grain alcohol, which may be used as a fuel in combination with gasoline.

fast-moving consumer goods (FMCG) Packaged commercial products that are consumed through use, i.e. pre- packaged food and drinks, alcohol, health and beauty items, tobacco products, paper products, household cleansers and chemicals, animal care items, etc. Unlike consumer durables (i.e. clothing, electronics, DVDs, and small appliances), FMCG are inexpensive products that consumers constantly re-buy.

fourth party logistics provider (4PL) Company that provides the supply chain leadership and analytical skills necessary to integrate all of the companies involved in the supply chain. 4PLs plan, steer, and control all logistics procedures but do not usually own assets in the supply chain. Also known as lead logistics providers.

freight forwarder Traditional transport intermediary who arranges transport for his customers’ cargo, finding the fastest and most cost effective route by utilizing his buying power with carriers. Also provides customs clearance services.

freight logistics provider (FLP) Freight forwarder who has evolved to offer value-added logistics services to customers (i.e. warehousing, distribution, pick/pack, labeling, etc.) in addition to traditional clearing and forwarding tasks.

freight pipeline System by which encapsulated freight travels in underground tunnels with the aid of either pneumatic propulsion , electrical power, a hydraulic system, or linear induction motors.

fuel cell Batteries that combine liquid hydrogen fuel and oxygen to produce electricity that can power a vehicle.

gas-to-liquid (GTL) Technology that creates a transportable, super-clean, non-petroleum diesel fuel from methane, one which has environmental and efficiency benefits over petroleum-derived diesel.

hydrogen Element that can be mixed with natural gas in internal combustion engines. It can also be used in fuel cells , which are batteries that combine liquid hydrogen fuel and oxygen (from the air) to produce electricity to power a vehicle.

Incoterms Standard trade definitions devised by the International Chamber of Commerce and commonly used in international sales contracts. Among the best known: EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To).

intelligent highways Highways that use information and communication technologies to direct intelligent vehicles and manage the dynamic allocation of road space.

just-in-time (JIT) System in which inventory is kept at a minimum in small lots, and products are supplied on demand rather than stocked in large quantities. JIT allows capital reduction, plant throughput, quality assurance, and market responsiveness.

International Ship and Port Facility Security Code (ISPS) Comprehensive set of measures aimed at enhancing the security of ships and port facilities. Implemented by the International Maritime Organization as part of the International Convention for the Safety of Life at Sea (SOLAS).

International Organization for Standardization (ISO) A network of the national standards institutes of 153 countries. ISO members have reached consensus agreements on specifications and criteria which are applied consistently in materials classification; the manufacture, supply, testing and analysis of products; terminology; and service provision.

logistics Process of planning, implementing, and controlling the efficient flow and storage of goods and their related information.

Maglev High-speed vehicles that are propelled along a physical guideway by magnetic repulsion.

multi-modalism Transfer of freight from one transport mode to another.

non-vessel operating common carrier (NVOCC) Companies that book space on ships in large quantities at lower rates and then sell space to shippers. NVOCCs consolidate small shipments into full container loads (FCL) that are transported under one bill of lading. The shipper in turn gets the benefit of cheaper rates.

open skies Policy that allows the aircraft of one nation to fly into or over another nation’s territory.

pneumatic propulsion Means of propulsion that utilizes compressed air.

postponement logistics System that provides manufacturers with a cost effective method of mass customizing a product. The idea is to maintain the product in a neutral or non-committed state for as long as possible, delaying its differentiation to the last possible moment.

procurement Purchasing.

P-Series Non-petroleum liquid fuel, which is a blend of natural gas liquids, ethanol, and MeTHF (derived from organic waste or material such as paper sludge, wastepaper, and food waste). Can be mixed with gasoline in any proportion inside a fuel-flexible vehicle.

radio-frequency identification (RFID) System that consists of a tag (placed on whatever object is being tracked) and a reader, which sends out electromagnetic waves. The tag sends waves back to the reader, which the reader then converts into digital data indicating the location of the tag and other information about the object. Unlike bar codes, radio frequency identification tags do not require line of sight or a human interface in order to be read.

roll on/roll off (ro-ro) Combined transport whereby vehicles drive onto a ferry, train, or plane at the beginning of the journey, and then drive off at the destination.

rolling motorway (ro-mo) Accompanied combined transport whereby a truck and its driver are transported by rail from Terminal A to Terminal B, at which point the truck is unloaded and the driver continues its road journey.

route-kilometer A unit of distance that measures the distance by rail between two points on a railway network.

supply chain Network of retailers, distributors, transporters, storage facilities, manufacturers, and suppliers that participate in the production, sale, and delivery of a particular product to its consumer.

supply chain enterprise portal (SCEP) Integrated database that is capable of supporting each function in the supply chain.

supply chain management (SCM) software applications Applications that automate and improve supply chain activities in order to achieve inventory efficiency; faster information flow; more accurate determinations of when and how much material/ capacity must be purchased, produced, or moved; and supply chain events monitoring.

supply hub Set up by a 3PL on or near a manufacturer’s site in order to warehouse and manage the inventory needed for production and distribution. The 3PL has a ready stock of parts for the manufacturer, so that neither the 3PL nor the manufacturer has to rely on extensive transport networks for delivery. The 3PL may provide other value added services, such as procurement, purchase order management, invoicing of supplier goods, and transport to and from the supply hub.

TEU Twenty-foot equivalent unit, used to describe a 20-foot dry cargo container.

third party logistics provider (3PL) Company that manages and executes particular logistics tasks (using its own assets and resources) on behalf of another company.

tonne-kilometer One metric tonne transported one kilometer.

trade bloc A regional economic partnership formed to promote trade between member states.

unit load device (ULD) Container or loading unit used for air cargo.

vendor-managed inventory (VMI) System that gives the supplier (vendor) the responsibility and authority to manage the entire replenishment process. He monitors the buyer’s inventory levels, makes re-supply decisions, and initiates transactions that would previously have been completed by the buyer.

wing-in-ground (WIG) Vehicle with wings that floats on a cushion of relatively high-pressure air between its wings and the water’s surface. This cushion is created by the aerodynamic interaction between the wing and the surface, called ground effect or surface effect.

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Table of Contents

TRANSPORT LOGISTICS

Past, Present and Predictions

Issa Baluch

ABOUT THE AUTHOR

FOREWORD

FOREWORD

ACKNOWLEDGEMENTS

INTRODUCTION

A NOTE ON WEIGHTS AND MEASUREMENTS

Past

CHAPTER 1

CHAPTER 2

CHAPTER 3

CHAPTER 4

CHAPTER 5

CHAPTER 6

CHAPTER 7

CHAPTER 8

CHAPTER 9

CHAPTER 10

Present

CHAPTER 11

CHAPTER 12

CHAPTER 13

CHAPTER 14

CHAPTER 15

Predictions

CHAPTER 16

CHAPTER 17

CHAPTER 17

CHAPTER 19

CHAPTER 20

CHAPTER 21