1. Challenges and Trends in Logistics: 2013 Dr. G. Don Taylor Charles O. Gordon Professor and Department Head, Grado Dept. of Industrial and Systems Engineering Virginia Tech

2. Presentation Overview  Economic Importance of Logistics & the Recent Recession  Commonalities/Differences in Challenges Between the US and the World  Understanding the Post Recession Logistics World  Research/Development Challenges Challenges and Trends in Logistics: 2013

3. Current & Recent Trends in the Great Freight Recession  Large loss of jobs in logistics Challenges and Trends in Logistics: 2013

4. Current & Recent Trends in the Great Freight Recession  Large loss of jobs in logistics  Large loss of revenue and share of GDP

5. U.S. Business Logistics Costs 5 Source: CSCMP State of Logistics Report Trillions of US$ Challenges and Trends in Logistics: 2013

6. Logistics as a Percentage of GDP 6 Source: CSCMP State of Logistics Report Logistics Cost as a Percent of US GDP Challenges and Trends in Logistics: 2013

7. Breakdown of Logistics Cost by Category 7 Source: CSCMP State of Logistics Report Billions of US$ Carrying Cost 434 Interest3 Taxes, Obsolescence, Depreciation, Insurance302 Warehousing130 Transportation Costs 836 Motor Carriers Truck-Intercity445 Truck-Local202 Other Carriers Railroads72 Water35 Oil Pipelines13 Air33 Forwarders37 10 Logistics Administration 51 Total Logistics Cost1,331 Challenges and Trends in Logistics: 2013

8. Current & Recent Trends in the Great Freight Recession  Large loss of jobs in logistics  Large loss of revenue and share of GDP  Domestic and international freight transportation have been affected

9. International Trade by Mode at US Gateways 9 Percentage Source: U.S. Dept. of Transportation Challenges and Trends in Logistics: 2013

10. Logistics Around the World as a Percent of GDP Source: Boston Logistics Group and CSCMP

11. Challenges and Trends in Logistics: 2013 Current & Recent Trends in the Great Freight Recession  Large loss of jobs in logistics  Large loss of revenue and share of GDP  Domestic and international freight transportation have been affected  The game has changed significantly

12. Commonalities/Differences Between the US and the World Statistic U.S. World Population (M) 314 7,000 Pop Density (km 2 ) 34 45 Urban (%) 82 50 Land Area (km 2 ) 9.16M 150M Global GDP (%) 23.4 100 12 Source: Various Challenges and Trends in Logistics: 2013

13. 13 Paved Road (km) 4.21M 18M Railways (km) 233K ≈1M Waterways (km) 41K 672K Pipelines (km) 0.79M 1.91M Airports (number) 14.9K 49K Source: Various Challenges and Trends in Logistics: 2013 Commonalities/Differences Between the US and the World Statistic U.S. World

14. Understanding the Post-Recession World of Logistics: Five Trends 1)Reliance on imports and the emergence of China. 14 Challenges and Trends in Logistics: 2013

15. 15 Challenges and Trends in Logistics: 2013 Understanding the Post-Recession World of Logistics: Five Trends 1)Reliance on imports and the emergence of China. 2)Energy price and availability.

16. World Oil Reserves by Region 16 Source: Wikipedia Challenges and Trends in Logistics: 2013

17. 17 Challenges and Trends in Logistics: 2013 1)Reliance on imports and the emergence of China. 2)Energy price and availability. 3)Environmental concerns. Understanding the Post-Recession World of Logistics: Five Trends

18. 18 Challenges and Trends in Logistics: 2013 1)Reliance on imports and the emergence of China. 2)Energy price and availability. 3)Environmental concerns. 4)The continuing rise of the internet. Understanding the Post-Recession World of Logistics: Five Trends

19. 19 Challenges and Trends in Logistics: 2013 Understanding the Post-Recession World of Logistics: Five Trends 1)Reliance on imports and the emergence of China. 2)Energy price and availability. 3)Environmental concerns. 4)The continuing rise of the internet. 5)Governmental debt.

20. 2014 Looking Better, but not Great 1)U.S. Household debt at local minimum. 2)Investment picking up. 3)Logistics capacity is available in some modes. 4)Truck and intermodal rates continue to creep upward. 5)U.S. energy production is up. 20 Challenges and Trends in Logistics: 2013

21. Recently, Arguments Support ‘Near Sourcing’ 1)Wage increases in China makes US more competitive. 21 Challenges and Trends in Logistics: 2013

22. 22 Challenges and Trends in Logistics: 2013 Recently, Arguments Support ‘Near Sourcing’ 1)Wage increases in China makes US more competitive. 2)Shipping costs on the rise.

23. 23 Challenges and Trends in Logistics: 2013 Recently, Arguments Support ‘Near Sourcing’ 1)Wage increases in China makes US more competitive. 2)Shipping costs on the rise. 3)Air freight prices vulnerable to whims of the market.

24. What are the Grand Research/Development Challenges? 24 Make solar energy economical Provide energy from fusion Develop carbon sequestration methods Manage the nitrogen cycle Provide access to clean water Restore and improve urban infrastructure Advance health informatics Engineer better medicines Reverse-engineer the brain Prevent nuclear terror Secure cyberspace Enhance virtual reality Advance personalized learning Engineer the tools of scientific discovery Source: US NAE Challenges and Trends in Logistics: 2013

25. But I Like Richard Smalley’s Prioritized List Better 25 Energy Water Food Environment Poverty Terrorism & War Disease Education Democracy Population Source: Richard E. Smalley Institute: Rice University Challenges and Trends in Logistics: 2013

26. What are the Grand Research/Development Challenges in Logistics? 1)The need for innovation and efficiency gains. 26 Challenges and Trends in Logistics: 2013

27. 27 Challenges and Trends in Logistics: 2013 What are the Grand Research/Development Challenges in Logistics? 1)The need for innovation and efficiency gains. 2)The need for innovation in niche areas.

28. 28 Challenges and Trends in Logistics: 2013 What are the Grand Research/Development Challenges in Logistics? 1)The need for innovation and efficiency gains. 2)The need for innovation in niche areas. 3)The need to think big.

29. Montreuil’s Unsustainability Symptoms 29 We are shipping air and packaging Empty travel is the norm rather than the exception Truckers have become the modern cowboys Products mostly sit idle, stored where unneeded, yet so often unavailable fast where needed Production and storage facilities are poorly used So many products are never sold, never used Products do not reach those who need them the most Products unnecessarily move, crisscrossing the world Fast & reliable intermodal transport is still a dream or a joke Getting products in and out of cities is a nightmare Networks are neither secure nor robust Smart automation & technology are hard to justify Innovation is strangled Challenges and Trends in Logistics: 2013

30. Montreuil’s Physical Internet Characteristics 30 Encapsulate merchandise in world-standard smart green modular PI containers. Aim toward universal interconnectivity. Evolve from material to PI container handling & storage systems. Exploit smart networked containers embedding smart objects. Evolve from point-to-point hub-and-spoke transport to distributed multi-segment intermodal transport. Embrace a unified multi-tier conceptual framework. Activate and exploit an open global supply web. Design products fitting containers with minimal wasted space. Minimize physical moves and storage by digitally transmitting knowledge and materializing objects as locally as possible. Deploy open performance monitoring and capability certifications. Prioritize webbed reliability and resilience of networks. Stimulate business model innovation. Enable open infrastructural innovation. Challenges and Trends in Logistics: 2013

31. Summary Remarks The global recession has fundamentally changed North American and world logistics. New global players have emerged Energy and environmental concerns will weigh heavily. The internet and business connectivity will increase. We cannot rely on government to fix our problems. We will need to think differently, bigger, and smarter. 31 Challenges and Trends in Logistics: 2013