Asia Logistics Wrap

Revisiting Space Logistics

Last November I did a post on the prospects of supply chains developing into space, titled "Outsourcing Space-bound Logistics." I was very happy to see the subject come up again over at Freight Dawg, a relatively new but excellent blog on logistics, where Eric points us to a program at MIT called "The Space Logistics Project." As I noted before, "space will obviously offer some extremely different environmental challenges than Earth-bound shipping, and quality and safety will need to be prioritized when targeting cost reductions." I believe Eric also points to this but simply noting how long it would currently take to transit space supply chains:

With transit times of up to 9 months on a mission to Mars, supply chain execution in space would be difficult.

I am not surprised that MIT has taken on this area of supply chain research, and it will be a fun site to stay up-to-date on as innovators develop all the architectures necessary to make the utilization of space supply chains a common phenomena. Once we overcome the most basic physical hurdles, space supply chains will become more sophisticated in terms of financing, IT, partnering and innovation. I am happy to see MIT using the same kind of architecture language employed here and originated by Dr. Cavinato of Thunderbird and the Institute of Supply Management.

Logistics as a Barometer of Economic Health

Earlier this month in the Wall Street Journal, an article in the "Market Movers" section caught my eye. Written by E.S. Browning, it discusses the use of the Transportation Average as an accurate lead indicator in forecasting stock market health. Of course, when the finance industry directs their often short-attention span to transportation, it massages the supply chain manager's ego and we feel they are finally getting what we knew all along--that supply chain architectures support all that which drives economic health. Although transportation is one aspect of those architectures, it operates in parallel and collaboration with the many other physical, financial, informational, relational and innovational aspects of supply chains. So, for example, if manufacturing indexes are down but transportation indicators are up, we have to look at not just what these two are telling us, but also how entire supply chains are operating to make a true assessment of economic strength.

Into the WSJ article:

As they try to predict the future, some analysts are sneaking a peek at a 100-year-old investment theory. Based on the writings of Charles Dow, one of the founders of The Wall Street Journal, it is called Dow Theory.

It is catching people's attention because, until recently, the theory was flashing a yellow warning light about the stock market's future. Just lately, the light has turned green, or very close to it.

Dow Theory's most prominent tenet is that, for a stock-market rally to have legs, it needs not only the Dow Jones Industrial Average to hit highs but also the Dow Jones Transportation Average.

Dow Theory holds that the industrial average represents companies that produce goods, while the transports are the distributors -- railroads, airlines, truckers and package-delivery companies. If both are strong, it means a broad swath of the economy is supporting the market's gains. If not, it is time to check the market for lurking problems.

Despite volatility in gas prices over the past year: 

Among the transports' leaders at the moment are trucking and railroad companies, which are seeing strong demand.

Analysts are noticing.

"I am not a huge proponent of the Dow Theory, but I do very much care about the breadth of the market rally -- how many different sectors are participating," says Ken Tower, chief market strategist at CyberTrader, a Charles Schwab unit. Mr. Tower likes to use other, broader means of measuring how widespread the market's gains are. "And we are seeing the midcaps and the small caps and the transports join the Dow industrials at record highs. This is a good sign for the market's strength going forward."

In regards to that short attention span:

Back in the 1990s, many investors felt tech stocks were more important than transports. They noted services were a far bigger piece of the economy than manufacturing. And services are distributed not by truck but, often, by technologies. Today, however, the big economic driver is consumers, who use a lot of transportation for themselves and the goods they buy -- including tech goods.

Whatever the case, the broad number of stocks included in the market's recent gains is making even some skeptics say that they don't see the market running out of steam just yet.

I think one of things often missed today is just how much the services industry has become part of the supply chain industry--assisting firms in developing the more complicated architectures related to relationship-building and innovation initiatives that build upon and help reinvigorate what is already established in the physical, financial and informational (technology) practices of supply chain operations. As the above paragraph mentions, technologies and their complementary services (consulting, support, maintenance, etc) are not independent of--they are approached horizontally across--physical distribution and thus analysis shouldn't be independent--not approached functionally or vertically.

It seems that what is required in terms of assessing economic health is a paradigm shift in the mindset of analysts, so that thinking is more horizontal and able to accurately describe industry interdependencies and their impact.

Outsourcing Space-bound Logistics

While browsing Instupundit, the short post "OUTSOURCING cargo transport to the space station" piqued my interest immediately, with the link taking me to an article at Popular Mechanics on outsourcing necessary freight shipments to space, titled "To cut costs, NASA plans to outsource its shipping jobs." Hey NASA, welcome to the club!

Written by Thomas D. Jones, a planetary scientist and former shuttle astronaut, the article can be broke down as follows:

It's not a glamorous mission--hauling water, food, spare parts and clean clothes to the International Space Station (ISS)--but somebody has to do it. The shuttle was the truck of choice when my crew delivered the Destiny Laboratory to the ISS in 2001. But now, with the shuttle orbiters heading for retirement by 2010, NASA wants commercial suppliers to take on the orbital shipping job, to lower costs and spur industrywide innovation.

Space will obviously offer some extremely different environmental challenges than Earth-bound shipping, and quality and safety will need to be prioritized when targeting cost reductions. But I think many cost reductions will come from simply accessing suppliers from outside the halls of NASA, which is probably paying outrageous prices on maintaining its current shuttle fleet. By contracting out, third-party logistics providers (3PL's) can reconfigure the supply chain appropriate to the task. And over time, the competition could likely result in that industrywide innovation.

The paragraph below suggests that eventually other supply chain management practices could become useful for space, such as perhaps vendor-managed inventory (VMI): 

Since ISS crews moved in six years ago, the space shuttle and Russia's unmanned Progress freighters have made deliveries. But the Columbia accident grounded the shuttle fleet for over two years, and the Progress's small capacity forced even two-man ISS crews into sometimes spartan operations. Last year, spacesuits aboard the ISS were out of commission for months waiting for spare parts.

The investment in space-bound cargo vehicles is of course not cheap:

The two companies getting NASA seed money (over $100 million each) for cargo craft are SpaceX and Rocketplane Kistler. SpaceX plans to loft its Dragon capsule atop a Falcon 9 rocket, but the smaller Falcon 1 caught fire and plunged into the Pacific last spring. With $100 million invested, the company hopes a second launch this winter will pave the way for the Falcon 9.

Rocketplane Kistler's craft, a reusable K-1 two-stage rocket, has yet to reach a launchpad. But John Herrington, director of flight operations and a former shuttle astronaut, says the K-1 will not only reach the ISS, but return cargo safely to Earth.

It seems that supply chains where the last leg will be a trip to space are upon us, and the same demands by customers on Earth will take hold in space:

Both firms plan to fly three test flights by 2010. The end of the shuttle era is upon us. But future crews won't care who delivers their cargo. They'll just want it to show up on time.

Priming China-ASEAN Trade

In the most recent online edition of Cargo News Asia, Gary Dale Cearley out of Kuala Lumpur discusses the potential impact of a FTA between ASEAN-member nations and China. This was actually reported on even earlier at Asia Times Online.

Of course, given geographic considerations, an FTA between China and ASEAN would quite positively impact trade flows between the two entities, affecting decisions on supply chain architectures across the entire Asia region. Mr. Cearley starts with this lead: 

"The recent meeting between the leaders of the Association of South East Asian Nations (ASEAN) and China in Kuala Lumpur on a free trade agreement (FTA) has made freight forwarders optimistic about future trade implications, and many are planning to increase their trade with China. A final agreement will eventually have far-reaching implications for all cargo transport between the two regions.

Quotes in the article from industry and related organizations:

"If this comes to pass we expect to see big demand," said Maritha Limen of Green Air Indonesia. "Right now, we don't have significant trade with China but hopefully as a result of this agreement we will see it increasing."

"The prospect of trade with China is very high," said Richard Chua of Yusen Sea & Air's Singapore operation, "Right now, our exports to China are not significant but we see the China market as a good prospect. We see it as moving ahead fast, even though we don't expect a significant improvement in exports to China in the very near future."

Xu Ningning, the deputy secretary-general of the China-ASEAN Business Council and well-known proponent of a China-ASEAN free trade zone, has described China-ASEAN trade as "a marriage of ideal partners" and reiterated that a surplus in the favour of ASEAN is more likely than one in favour of China.

"Right now there is much trade going on with China, both legally and illegally, which is mainly conducted across the borders overland in the northern ASEAN areas," said Nguyen Thi Hiep Hang of Aeroceanetwork, a Vietnam-based logistics consultancy. "Lowering the tariffs on this trade both ways will promise to grow the legal trade and shrink the illegal trade. Elimination of tariffs would only make prohibited items real Customs targets. Economies will grow and smuggling will shrink.''

Nelson Cho of Singapore Technologies Log-istics, part of the government-owned Sembawang Group in Singapore, agrees that the benefits are there but doesn't think that this will cover all areas promised by China. "We are already handling export trade from ASEAN to China so I can say that this will improve the balance of trade," said Cho. "But I envisage the import will be mainly raw materials from China or high-end components. If China works out a free trade agreement with ASEAN we will see an increase of trade," said Cho. "Also with the proposal of India, Korea and Japan joining China and ASEAN to form an economic and trade zone, I forsee fast growth in trade annually."

Jewell Truong, a Ho Chi Minh City-based freight forwarder, said: "Europe and North America are far away and they have their own agendas. Other regions are too small or too weak to help us. So we need to keep China and India in future growth plans. There will be very big cargo growths from these two countries. Of course, we will still see some growth from Japan, Korea and Taiwan, but nothing to match China and India."

The move towards a China-ASEAN FTA will definitely pull in Korea and Japan eventually and has tremendous implications for the entire region if India also enters into any final agreements. Assuming that "greasing the wheels" of trade in this way assuages any significant, negative political history and issues between neighboring countries, the long-term prospects for the logistics services industry are very positive indeed. In particular, I believe those individuals and firms with tried and true cross-border expertise and capabilities will be in ever increasingly high demand.

Improving Tokyo-to-Seoul Intermodal Links

Ideally, freight and product in transit along supply chains will move seamlessly from origin to destination no matter which proportion of modes (transport vehicle) are used or through which nodes (storage or processing location) that freight or product passes through.  Obviously, the ability to maintain seamless movement breaks down due to several variables--distance, geography, freight and product complexity, amongst many others.

How firms managing supply chains adapt to the above variables depends on the quality of their supply chain architectures. As mentioned here many times before, these architectures can essentially be reduced to five: physical, financial, informational, relational and innovational. Usually, these architectures develop sequentially in the order above towards the point where a supply chain attains high performance, although this is not necessarily a given. The innovational architecture is important for the purpose of maintaining high performance through the resilience achieved in the face of continually evolving external and internal operational environments. The innovational architecture ensures that the other architectures are continuously reviewed for improvement and iterative or transformative adaptation.

With this framework, we can better approach available information on the development of a particular supply chain. Today, I want to focus on an article out of Logistics Japan on 9/18 that highlights changes in Tokyo-Seoul supply chain links, initiated by JR Freight. This article is titled "Cooperation with Korean Rail Public Corporation: Linking Tokyo to Seoul in 4 Days, Cheaper and Faster" and written by a Mr. Takagi. Rather than translate the entire article, this time I will highlight those areas that illustrate improvements in the architectures mentioned above.

Physical Architecture:

"In general, the Tokyo-Seoul link will be a continuous rail-sea-rail link...

"This will be the first case in which JR Freight 12-foot containers will be utilized by a rail company overseas, starting from January 2007...

"The idea is to utilize the modal combination of rail and sea to provide a cheaper small lot, door-to-door service between Japan and Korea...

"The primary nodes in transit will be at Fukuoka on the Japan side and Pusan on the Korea side, linked by sea freighters between those two cities...

"JR Freight containers will be joined in threes and placed on 40-foot flat truck platforms for sea shipment and connections on the Korea side...

Financial Architecture:

"The two companies will seek ways to jointly implement the management of charging fees and fee collection...

Informational Architecture:

"The handling and transmission of customs procedures and information will be outsourced by JR Freight to Nittsu on the Japan side, while also strengthening sales links...

Relational Architecture:

In addition to the relationship established above with Nittsu, the obvious joint-management established with Korea Rail is the overall, governing architecture: "While both companies hold joint-meetings with lead managers, the service details will be further developed. Negotiations will also be held with shipping companies."

The article also mentions that JR Freight will set-up a similar system with COSCO in China, linking Tokyo with Shanghai. In this case, the operations would begin in March 2007. The innovational architecture in this case, I think, would go back to how JR Freight is trying to think outside the box and review the reach of its services outside Japan. The below document illustrates the Tokyo-Seoul link visually:

Download tokyoseoul_link.ppt

Popularity of Learning Japanese in China

"Even if we don't like them, we know there is a lot we can learn from them." --quote of a Chinese manager in China regarding his opinion of the Japanese during my internship in 2004 in Beijing.

There is word that has come about in Japan to describe the country's relationship with China--that word in Japanese is: 政冷経熱. The characters mean "cold political ties, hot business ties" in terms of feeling. The news and numbers don't lie. While scores of articles have described the chilled relations between Japanese and Chinese politicians (although hopefully now thawing), the business press has noted the accelerating growth of Japanese FDI targeting the Chinese mainland, which reached $6 billion last year.

The growing presence of Japanese businesses on the mainland and their resulting investments in physical capital and human capital has caught the eyes of the Chinese, especially those youth graduating with the increasing possibility of entering a foreign company. Japanese language schools and course enrollment at universities have increased considerably. Chinese realize that there are careers and money to be made in working with the Japanese and have not hesitated to shore up their language skills for extra advantage.

On October 16, JETRO (Japan External Trade Organization) announced trends for its "Business Japanese" test as offered in China. Translated into English:

"Business Japanese Gains in Popularity: Chinese Testing Locations to Increase"

For the business Japanese proficiency test offered by JETRO, test takers in China have increased considerably. For this year's test in November, the number of test takers has increased 47% from last year. With Prime Minister Abe's recent visit to China, it is expected that there will be improvements to the Japan-China relationship, and thus JETRO plans to look into additional testing locations on the mainland.

This is a positive development for the Japan-China relationship. If today's youth are to eventually be future leaders of China, it will be important to have amongst them several fluent in Japanese and understanding of the Japanese culture and history in relation to China's own culture and history. The same goes for Japan.

World Bank on East Asia

I was browsing the Private Sector Development Blog after a long absence and noticed they have added a new blogger, Milan Bahmbhatt, author of the below report on East Asia:

Download east_asia_report_update_march_2006.pdf

The above report can help those operating in East Asia better understand the regional environment and context. Visit the main page at the World Bank site for more information and reports.

The Survival of Small Logistics Firms

Because I currently work in a medium-sized logistics firm here in Japan, I have often discussed the struggle for such firms to be resilient in the face of the rapidly and deeply penetrating effects of globalization into once isolated domestic markets such as in Japan and China, amongst other countries throughout the world's history.

Recently, I came across an article in Cargo News Asia titled "Small Firms Fight for Survival" that I later discovered had been touched on by both the China Economic Review and also referenced by the China Law Blog. Expanding on their commentary, I would like to look at the article from my experience as someone working in a logistics company and also reflect on the similarities between China and Japan's logistics market dynamics for smaller firms.

Due to the fact that Japan's logistics industry has been highly regulated until only recently, its dynamics are not too unlike China's logistics market, and in some cases it could be said that China's logistics market is more progressive. Alongside the picture painted in this article by Ramond Duan in Beijing, I will try to paint a parallel picture of Japan.

The article starts off with the following paragraphs:

Small Chinese logistics operators are fighting for their lives as consolidation and expansion-minded multinationals form a two-pronged assault on an industry predicted to grow by 15 to 20 percent a year until after 2010.

Consolidation has been in full swing since China opened up its logistics sector on December 11 last year under World Trade Organisation agreements. Multinationals have seized the opportunity to enter the market independently or take over niche domestic operators and expand into the hinterland, while big Chinese domestic firms are gobbling up small mainland companies.

As the competition hots up in the coming years, "there will definitely be fewer but stronger players in the logistics market,'' said Cai Jin, director of the China Logistics Information Centre. "Many will have to pull down their shutters or merge with rivals."

Due to the maturity of the Japanese market, the logistics industry here isn't expecting near the growth of China, but small Japanese logistics operators are under extreme internal and external pressures as larger firms become more comfortable with M&A strategies, and as foreign firms further adapt to the unique demands of the Japanese market.

Japan's logistics industry has also experienced deregulation not unlike that China has initiated under WTO requirements. In the past, logistics operations across Japan were extremely fractured and thus smaller firms could count on being protected from competitive pressures due to local barriers to entry; they could maintain their local niche without the fear that more resourceful firms could readily establish competing operations. However, with the concept of a "nationwide network" being key to the marketing of logistics services for Japanese 3PL's, larger firms are moving to solidify this type of network via acquisition while regionally-based niche firms are trying to increase value-added services that will help them maintain market position. Those medium-sized firms caught inbetween establishing a viable niche and providing a flexible, nationwide network are in a difficult strategic position--these firms either will need to get larger via M&A or restructure to enable a focusing of resources into their most successful and resilient niche services to avoid going out of business.

The article illustrates that China's market is similarly fractured:

There are more than 700,000 logistics enterprises registered on the mainland, mostly small and medium-sized operators, according to the Chinese Federation of Logistics and Purchasing. Most of them lack strategic planning, skillful personnel and systematic management, amplified by a poor level of information technology.

Wu Yue, a senior logistics researcher with the Beijing Materials College, said: "As competition grows and the market environment changes, the consolidation of various types of logistics providers will expand, both in scale and scope."

And that smaller Chinese firms have similar strategic decisions to make as smaller Japanese firms:

If Chinese operators specialise in specific areas in which they hold the upper hand they could get stronger, despite the flood of foreign capital, said a source at the Chinese Federation of Logistics and Purchasing.

The interesting thing about the first highlighted paragraph above is that it clearly emphasizes the three pillars of strategy management as presented in The Balanced Scorecard and strategy mapping. Those pillars, under the "Learning and Growth" perspective, are organizational capital--which strategic planning and systems management falls under, informational capital--which information technology falls under,  and human capital--which skillful personnel management falls under. In such a difficult and rapidly changing market environment, strategy mapping is a management tool that can assist small logistics firms in making the strategic decision(s) being forced upon them.

In essence, the strategic decision(s) facing small- and medium-sized Japanese logistics firms is the same facing Chinese firms:

He (Mr. Wu Yue above) warned that resources would flow towards strong businesses, the average profit ratio of the industry would further decline along with demand for brand and service quality, and the small operators would be ousted or shift their focus to survive.

Below the article illustrates just how aggressive foreign operators are in shifting strategy in the face of deregulation. Interestingly, the pace and depth of this activity seems to exceed that of Japan in a historical comparison, with foreign operators now simultaneously strengthening their presence in Japan. I believe that the growth in China has logically had a profound effect on the strategic decisions made by foreign operators in the rest of East Asia, particularly with the heavy amount of trade between between China and the Japanese and South Korean markets.

Since the opening of the logistics market, there have been big changes on the foreign logistics landscape: Schenker set up a logistics centre near Beijing's airport; STX Panocean of Korea launched a joint venture in Qingdao in April; US multimode operator Burlington Northern Santa Fe Corporation set up an office in Shanghai in April; Prologis and Wurth plan to expand their logistics park in Shanghai; and container service provider Scoular settled down in Guangdong.

But it was the buy-outs of businesses by multinationals that is causing the biggest ripples. FedEx, which entered into a 50-50 joint venture with Datian in 1999 after leaving another partner, paid the company US$400 million to purchase the other 50 percent early this year. Soon afterwards, TNT offered US$135 million for 100 percent control of Huayu Logistics, the biggest truck operator on the mainland, based in Heilongjiang Province. A year earlier, UPS agreed to pay US$100 million to break free from a joint venture with Sinotrans.

One of the interesting phenomenon to watch will be how small- and medium-sized, private Chinese logistics firms react to M&A by larger foreign operators and other mainland logistics firms. With the above deals and the additional information below, it seems already that the Chinese market is at least in line with Japan, and perhaps even more open to such activity. In the least, operators are considering a number of strategic options and this in and of itself will contribute to growing sophistication in the market over time:

Then why are local operators eager to sell? Money matters, said a Beijing company manager. Private operators see opportunities to make lucrative gains by offering their services to multinationals.

(From my limited experience in China, I have found that traditions are less of a barrier when money is to be made as compared to Japan).

Wang Zhile, director of the Multinationals Research Centre of the Ministry of Commerce Research Institute, said foreign investors needed first to consolidate domestic market resources and management to improve efficiency before buying out their mainland partners.

Other local operators have decided on a different route to stay in the fight. Chen Ping, chairman of Zhai Ji Song Express Delivery (ZJS Express), based in Beijing, plans to list the nation's top private express company in Hong Kong. He is already in contact with fund managers and accountancy firms. Baogong Logistic Group, a 3PL in Guangdong, is also considering the IPO (initial public offering) route on the mainland since the government lifted its IPO ban in the Shanghai and Shenzhen stock markets in late May after a year-long closure.

There are a number of resources on M&A activity in China, but below is one of the most recent and publicly available reports I have on hand:

Download china_ma_report_2006.pdf

Interview on Crisis Logistics

Due to disasters and conflicts coming under intensifying focus and scrutiny in this era of expanding and accelerating information access, the make-up of post-disaster/post-conflict response efforts is becoming increasingly transparent. At the same time, the comprehension and understanding of logistics challenges throughout disaster/conflict-related events could be said to lag what is necessary in order to provide quality reporting and analysis.

Since I personally do not have experience in the management of logistics in such situations, it is always good to find first-hand accounts of experience and perspective from the front lines. Recently, I found one such account via Inbound Logistics titled "Crisis Logistics: Risky Business" and reported on by Amy Roach Partridge in the Global Logistics section.

Ms. Partridge interviews a Mr. Ron Cruse, president and CEO of Alexandria, Virginia-based Logenix International, a logistics firm described as follows at its website:

Logenix International is a multifaceted logistics company that specializes in the global planning, implementation, and forwarding services for the US Government, its contractors and the worlds most admired Humanitarian Organizations.

Be sure to check out the additional news articles at the website--some are quite interesting in regards to the flow of goods to and from, and around Iraq. In terms of Cruse, Inbound writes that "whether delivering pharmaceuticals to radiation exposure patients affected by the Chernobyl nuclear disaster, helping run supplies to the Afghan mujahideen in the Afghan-Soviet War, or more recently, assisting with tsunami relief in Banda Aceh, Indonesia, Cruse has navigated the globe in the name of logistics."

In the interview with Inbound, Cruse touches on "the challenges of efficient supply chain management under the most extreme conditions." I have posted the entire interview here for the value of future reference in case the Inbound site cannot be accessed. One of things to take note of is where Mr. Cruse uses terms that recall both Tom Barnett's four flows--economic, political, security and people--and the five architectures of high performance supply chains--physical, financial, informational, relational and innovational. I have italicized in bold type portions for emphasis.

On Lebanon:

IL: The fighting in Lebanon caused significant damage since you were there. What challenges do organizations face delivering relief supplies to the area?

RC: Infrastructure is an important issue for Lebanon  --  the ports are excellent, and the airport is good. But there are no real highways, mostly rural roads running between villages, which is challenging for moving heavy equipment. Checking incoming cargo is another issue. There are two road routes into Lebanon  --  through Israel and Syria. If the Israelis don't allow relief goods in, the road from Syria is the only option.

If convoys are coming into Lebanon from Syria, however, it is hard to know how much humanitarian aid they are carrying, or if they are carrying missiles. The Israelis are saying right now that any truck is a bad truck.

However, I don't expect the humanitarian relief for Lebanon to be as encompassing as, say, Banda Aceh. Lebanon is not isolated; agencies bringing supplies don't have to cover huge distances to get there. Much of the aid will likely come in to Lebanon through Jordan. The roads through Syria are better, but that route poses bombing threats. Cypress is also close to Lebanon; organizations can stage operations there and bring supplies across by ferry.

The main factor is stopping the violence so organizations can get into Lebanon. The political issues may have the largest effect on supply delivery.

On the Nature of Humanitarian Logistics:

IL: The corporate sector tends to lump 'humanitarian logistics' into one category. How do logistical challenges vary from crisis to crisis?

RC: Everything from weather to infrastructure to geographic positioning makes a difference to humanitarian logistics and projects in developing countries.

Take the Darfur region in Africa, for example. Darfur is the most challenging situation right now  --  logistics there is as hard as it gets. The government is against outside help, there is a huge refugee population, the infrastructure has been damaged by years of war, mines are everywhere, and the area is extremely remote.

In Banda Aceh, we dealt with a different set of circumstances. When I worked throughout the Commonwealth of Independent States in the early days after the breakup of the Soviet Union, it had a strong rail system  --  that was the key to getting assistance there. Iraq has good roads and is close to central delivery areas including Dubai and Kuwait, but it is incredibly dangerous.

For each situation, you have to evaluate the violence levels, infrastructure quality, and how far the area is from other stable regions.

On the Reputation of Humanitarian Logistics:

IL: The humanitarian logistics industry sometimes gets a bad rap for being disorganized and inefficient. What's your take on the industry's effectiveness?

RC: Humanitarian relief agencies on the whole are savvy  --  they buy the right supplies, and they know how to get them to affected regions.

In Banda Aceh, for example, malaria was a big problem. Because these agencies have experience in the area, they knew they had to bring spraying equipment and insecticide into the region.

There are about 40 great dedicated humanitarian groups such as Medecins Sans Frontires (Doctors Without Borders, an international organization that delivers emergency medical aid to people affected by conflicts, epidemics, and disasters).

However, they can't go into an affected region and run an airport or a distribution/supply line; they need help in that area. The United Nations has the infrastructure to enter these areas and quickly deliver relief to a lot of people. Their infrastructure usually provides the base for all other agencies involved.

Usually disorganization occurs when the location in question is isolated. Waste and inefficiency can also be factors when an agency tries to apply the formula it used in, say, Darfur somewhere else in the world. The issues and the type of goods needed are different for each project.

Also, overcoming bureaucratic hurdles is tough  --  problems can pop up if the local government is not 'massaged' the right way. As well-intentioned and needy as a local government may be, dealing with them can be perplexing. It is hard for organizations to do this if they don't understand the area  --  that also applies to corporate entities that want to help.

On Key Success Factors:

IL: What is the most important element for logistics success in the developing world?

RC: The key is understanding culture  --  this is what Westerners struggle with most in the developing world. Being successful in this type of logistics has to do with how well you can navigate and understand local issues.

When I was running relief to the mujahideen in the 1980s, for example, we tried to deliver food, but they wouldn't eat the type of food we brought them. The intent to help is insufficient by itself; it is a good idea to hire local people to guide you.

The effective private volunteer agencies excel in this respect  --  they have ongoing relationships where they deal with local cultural issues, and they know what it takes to succeed in a particular area.

On Lessons for the Private Sector:

IL: How can companies learn from these efforts? What can they do to prepare if they have facilities in areas that are affected by war or disaster?

RC: Companies need to have a good evacuation procedure in place for their employees. And they need to know that at the first sign of a problem, it's time to leave the area.

I got caught in Sri Lanka in 1993 when President Ranasinghe Premadasa was assassinated. Riots never erupted, but I didn't get out of there as fast as I should have.

Companies located in places that are prone to civil unrest must have a plan to get people out quickly and efficiently. That's the only thing that works.

For those new to the site, I have touched on this topic from early on:

Role of Logistics in Disaster Relief

The Role of Supply Chain Logistics in "Shrinking the Gap"

Military Supply Chain Logistics: Insight from Iraq

Revisiting Post-Disaster Logistics

ADB on Asia Growth Rates

Earlier this month, the Asia Development Bank released some revised forecasts for growth in Asia. In the first article, the ADB discusses growth for the PRC, the primary factors involved, and also the risks that still exist when looking ahead at China's economic momentum.

"The economy posted very rapid growth in the first half with fixed-asset investments, exports, and imports all rising significantly from a year earlier," said Mr. Ifzal Ali, ADB Chief Economist, at the launch of Asian Development Outlook 2006 Update.

"Even with an interest rate increase in mid-August that followed earlier monetary and administrative tightening measures, we expect second-half cooling to be modest. Our concern is that if the current investment boom continues, it could result in chronic overcapacity," he said.

In the second article, the ADB looks at all of developing Asia:

"Developing Asia’s rapid growth is underpinned by strong performances by the People’s Republic of China (PRC) and India, which together account for more than 50% of regional GDP," said Mr. Ifzal Ali, ADB Chief Economist, in launching Asian Development Outlook 2006 Update.

"The region should take advantage of this strength to act in three areas that could undermine growth if not addressed - the need to complete the adjustment to high oil prices, the need to pick up the pace of fiscal consolidation, and the need to stimulate investment," he said.

Of course, from this news we can infer that supply chain activity will also be expected to grow across links to and from the developing Asia region as well as within the individual countries that make up this region. Along with simply trying to match capacity with demand, there will be continuing efforts to simultaneously create more efficient and effective supply chain performance.

To ensure successful supply chain performance even further, there will be growing efforts to secure supply chains in those developing regions that are the least sophisticated. Leading logistics providers and supply chain management firms will be at the forefront of this effort and paints a very positive picture of business opportunities for the supply chain professional operating in Asia, or with significant experience in Asia but operating outside the region.

Assuming such growth rates will not last forever, or that a significant negative event like the Asia Financial Crisis or 2004 tsunami will eventually occur again, now is a great time for logistics and supply chain firms to build additional resiliency to better survive slower growth or crises, or a combination of both. Although activities dedicated to instilling resiliency obviously need continuous attention, much can be overlooked when times are good and thus addressed too late when "crap hits the fan." Especially small- and medium-sized businesses with fewer resources to dedicate towards long-term strategic activities need to be extra vigilant.