Posts Tagged ‘logistics’

EFP Brief No. 233: A Foresight Approach to Reshape Bogota’s Food Supply and Security Master Plan

Friday, December 21st, 2012

This forward looking exercise suggests a new approach to better structure Bogota’s fruit, vegetable and tuber supply chain by reviewing and reinforcing certain strategies stated in the Food Supply and Security Master Plan (FSSMP) in order to promote actions by the public sector and the stakeholders involved in this supply chain.

Food Supply at Affordable Prices

Bogota’s fruit, vegetable and tuber supply chain involves multiple actors, business models and interests, which are not yet aligned and can hardly be coordinated without both public and private involvement. In 2003, the City of Bogotá commissioned the CPTCIPEC Consortium to conduct a diagnostic study of the food supply chain system and the nutrition of the city’s inhabitants. This study served as input to the Food Supply and Security Master Plan (FSSMP) in 2006. From a nutritional perspective, it identified significant gaps in the intake of some foods, in particular fruits and vegetables, compared to an ideal diet. Concerning the operation of the supply system, it suggested eliminating massive product loss along the supply chain to increase the offer of these foods and reduce the number of middlemen in food markets as a means of lowering prices and making the products more affordable to the general public.

Logistics and Virtual Trade Platforms to Increase Food Supply

The FSSMP suggested the creation of a new food supply system that facilitates direct exchange among producers and retailers. The new organisation would be bolstered by introducing a virtual trade platform for products, a regional network of food consolidation centres and five logistics platforms in Bogota whose main role would be to facilitate cross-docking operations rather than product storage. Therefore, the FSSMP suggested to undertake efforts to establish groups of producers (supply) and retailers (demand) and advance the design and construction (or implementation) of a logistics and e-commerce platform. Despite all efforts, it has been difficult to convince producers and retailers to shift from traditional supply chains to the new scheme proposed in the FSSMP.

A Foresight Approach to Review FSSMP Strategies

New advances in logistics strategy and the first results of implementing the FSSMP show a lack of effectiveness of the strategies originally stated. Therefore, the current study reviewed the initial statements in the FSSMP based on a foresight approach. The foresight methodology used in this study consisted of five stages: pre-foresight, recruiting, generation, action and renewal (Miles, 2002; Popper, 2008b). First, the Master Plan served as input to define the objectives and scope of the exercise. Then, stakeholders and their relationships were identified. Later, system dynamics (SD) was used to model product, information and money flows along the fruit, vegetable and tuber supply chain.

As a result, two scenarios, for five products, are presented that discuss actions by the public sector and reactions to be expected throughout the whole food supply system. Finally, these outcomes are compared to the Master Plan’s objectives and some recommendations are made to improve its implementation. For this exercise, we consulted 247 market storekeepers, 15 experts in the production and trade of fresh products and urban logistics, 5 industry experts, personnel from the Corporación Colombia Internacional (CCI – the trade association of tomato, banana and plantain farmers), 5 managers from the Secretaria de Desarrollo Económico (SDDE) and researchers from MIT-CTL. More specifically, the stakeholders identified in the fruit, vegetable and tuber supply chain are represented in Figure 1:

System Dynamics Inputs: Material, Financial & Information Flows

The metrics of the SD model, such as flows, costs and prices, were defined from secondary sources such as regional and national studies, statistics, polls and governmental reports. Initially, the FSSMP included only material flows and nine scenarios that focused on identifying capacity problems in production, transport, distribution and inflows to Bogota. However, the new SD model developed in this study went further by including, to some extent, the flow of products, money and information of the five most important products (bananas, oranges, potatoes, plantains and tomatoes) in the fruit, vegetable and tuber supply chain.

Material Flow

The actors, represented in boxes, exchange food products. They will send – or ask for – a greater quantity of products through a certain channel depending on supply, demand, prices and costs (Figure 2). Every actor’s purchase and sales prices are determined by adding the previous actor’s costs per unit sold, fixed costs, variable costs, waste costs and expected monthly profit.

Financial Flow

The cash flows represented are costs of transportation, costs of distribution, costs of selection and prices. In addition, delays are depicted as money flows from purchases of middlemen, stores, wholesalers and supermarkets, which are paid in cash (Figure 3). Half of the money from wholesalers’ purchases is given at the moment of product delivery while the remaining half is due one month later. Supermarkets apply a 90-days payment policy to their suppliers, which means that total payment is completed three months after receiving the product.

Information Flow

We observed an exchange of information among stakeholders before the pricing point (represented by a dotted line in Figure 4). There is an exchange of information about purchase prices with the producers, on the one hand, while sales price information flows to the actors forward in the supply chain, on the other. The interaction of actors after price formation produces flows in two senses: information on demand that goes to wholesalers and logistics platforms and information on sales prices that goes to stores and customers.

Scenarios of Producers’ and Storekeepers’ Associations

After identifying these three flows that affect the supply chain under study and including them in the new SD model, eleven new scenarios were defined, but only four were elaborated in the SD model. However, in this work we present only two scenarios for the top five products in order to show the impact of storekeepers’ and producers’ associations. A set of variables in the SD model (tables 1 and 2) was grouped in the following categories: flow changes in distribution channels and variations in product volume, profits and prices. Thus, the model was run to observe the behaviour of these variables for the five selected products.

The first scenario measured the impact of producers’ associations on the supply system (Table 1). It revealed a reduction of transportation costs due to better use of transportation capacity, a wider distribution of products’ consolidation costs since they are divided among all producers and an increase in productivity because producers’ orders are centralised. The producers’ association scenario presents favourable results for the various variables along the supply chain for bananas, oranges and potatoes. However, the variables for plantains and tomatoes show no changes, which is explained by the fact that producers of these products generate enough profits to organise transportation to forward actors in the chain on their own.

The second scenario measured the impact of storekeepers’ associations on the supply chain (Table 2). In this scenario, there are cost reductions in the selection and distribution of products and reductions in sales prices across all five products sold by storekeepers to customers. The main obstacle to achieving an association of storekeepers is the creation of a scheme for stores that allows an agent to delegate the process of sorting fruits and vegetables to the storekeepers selling the products to the final consumers.

Reshaping FSSMP Strategy to Anticipate the Future

This forward looking exercise allowed the SSDE to better understand and implement the FSSMP. The two main scenarios depicted here as well as the SD model for the five products show, to some extent, the relationship between the actors, their interaction, and the structure and performance of Bogotá’s food supply system. The limitations of the model suggest that the food supply in Bogota cannot be studied without considering demand in the rest of the country or the economic feasibility of production. The following conclusions were drawn from the outcomes of this exercise:

1) The priority for products such as bananas and plantains should be to increase production to supply the city instead of reducing prices. The models reveal that the production of these two foods is quite low compared to demand. Nevertheless, food supply of the city should not be considered isolated from demand in the rest of the country.

2) Middlemen and wholesalers do produce value especially in case of products and trade channels with low trade volumes. The study showed that direct supply from producers to stores is more expensive than when other actors are involved. Higher costs arise because of the additional work involved in selecting the products required to replenish the stores. A detailed analysis showed that the cost gap between direct channels and other channels results from the selection costs incurred by stores when
buying directly from producers and from the size of the purchase order to be managed by the seller in-house.

3) Prices tend to even out between different channels. A balance of prices sets in because producers, looking for higher profits, will attempt to supply the channel that represents the highest profit, increasing the products offered through the respective channel. As a result, we can expect this not only to encourage a reduction in prices in this channel but also to reduce or increase existing shortages of products and costs in the other channels accordingly.

In order to reinforce the strategies and recommendations stated in the initial FSSMP and respond to the reality of food supply in Bogota, it is highly recommended

1) to acknowledge the diversity of stakeholders along the supply chain and develop operational or contractual schemes that allow to align efforts and deal with risks;

2) to tackle problems in the fruits and vegetables supply chain by individual product since each product responds to different dynamics of supply and demand;

3) to further develop and improve the SD model as a tool to collect and analyse information regarding the food supply system and further pursue the different research initiatives to accomplish the objectives stated in the Food Supply and Security Master Plan (FSSMP).

Download EFP Brief No. 233_Reshaping Bogota’s Food Supply and Security Master Plan.

Sources and References

Alimenta Bogota Program (2009a): Plan Maestro de Abastecimiento – SDDE. Recuperado el 17 de Febrero de 2011, de Plan Maestro de Abastecimiento – SDDE: http://www.alimentabogota.gov.co/index.php/sobre-alimentabogota/plan-maestro.

Bogota Program (2009b); Biblioteca | Caracterizaciones. Recuperado el 18 de Febrero de 2011, de Plan Maestro de Abastecimiento: http://www.alimentabogota.gov.co/index.php/biblioteca/cat_view/11-Caracterizaciones

Miles, I. (2002): Appraisal of Alternative Methods and Procedures for Producing Regional Foresight.

Popper, R. (2008b): How are foresight methods selected? Foresight 10 (6): 62-89.

EFP Brief No. 231: FreightVision Austria 2050

Tuesday, December 4th, 2012

The project Freight Vision Austria 2050 (FVA2050) aimed at providing a foresight study of freight transport and logistics futures in Austria by 2050. The intention was to explore the future of freight transport and logistics in particular, looking at technological progress and future innovation opportunities. A second aim was to outline a shared vision of an Austrian freight transport system by 2050 that would achieve European as well as national environmental and transport policy targets. The project FVA2050 was structured similarly to the European project FreightVision Europe (FVE 2050). FVA2050 was commissioned by the innovation section of the Austrian Ministry of Transport, Innovation and Technology. The objective was to set priorities and give a synopsis of key technologies and future innovation opportunities.

Coping with Increasing Demand for Freight Transport

Similar to economic growth, demand for freight transport in Europe is expected to double by 2050. As integration of the European internal market progresses and Europe represents one of the most competitive economic regions of the world, export industries all over Europe are expected to grow. This will particularly concern small, export-oriented national economies at the centre of Europe, such as Austria, which are strongly affected by freight transportation. Experts estimate that freight transport will increase across all transport modes.

Rising pressure on infrastructure capacity, an increasing environmental burden and upcoming conflicts over failing to achieve CO2 emission and noise reduction targets are likely. However, from a regional perspective, increase in transport demand might not affect the overall transport network in Austria apart from the main traffic axes. FVA2050 was informed by the general vision of the European Commission for a most competitive and sustainable transport system in Europe. This includes “growing transport and supporting mobility while reaching the 60% CO2 reduction target” (European Commission 2011, p.5). However, priorities from a regional perspective may differ from those defined at the European level. Other environmental policy targets, such as particulate matter or noise and vibration reduction, can be considered equally important.

Most freight transport in ton/kilometres is regional and not long distance freight transport. From a regional perspective, future scenarios revolving around reregionalisation are thus more feasible than scenarios based on internal market integration and globalisation. From a regional point of view, traffic congestion is a problem of infrastructure bottlenecks and not of the overall European transport network. The main challenge here is to coordinate environmental and transport-related policy targets across different policy levels and policy areas.

Stakeholder and Expert-driven Approach

The FVA 2050 project pursued an expert-driven, forwardlooking approach. Stakeholders and experts from different areas relevant to freight transport in Austria participated. Among them, in particular, demand-side actors from transport and logistics companies, but also researchers, NGOs and public administration representatives at the national and the state level (Länder). The aim of FVA 2050 was to explore possible futures of freight transport and logistics in Austria up to 2050. The participating stakeholders and experts outlined a shared vision and, in the process, blueprinted structural change in the freight transportation system to achieve the European CO2 emission targets and other transport and environmental policy objectives, such as minimising road fatalities, abating noise and particulate matter pollution and reducing congestion. Ideas and opinions on how to transform the current freight transport system towards this vision were discussed in detail, particularly ideas concerning technology and innovation pathways towards the future.

Scenarios and Socio-economic Trends and Trend Breaks

In the first workshop, the initial task was to outline framework scenarios describing possible socioeconomic futures that reflect the social and economic environment in which freight transport and logistics activities can be imagined to take place in the future. Four framework scenarios came out of this exercise: two scenarios reflecting current socio-economic trends and two scenarios taking potential trend breaks into account. Drivers, trends and trend breaks were jointly investigated. The experts drafted storylines for socioeconomic scenarios in group exercises and later developed them into coherent future stories:

· Trend scenario “Growth and liberalisation”
· Trend scenario “Growth and regulation trends”
· Trend break scenario “Oil & energy price shocks”
· Trend break scenario “Regionalisation & shrinking”

In the second foresight forum, the participants identified relevant technology and innovation pathways towards the future from a present point of view and perspective. They assessed options and obstacles of technological progress from the present to the future and opportunities for future innovations, considering the socio-technical context embedding and the socio-economic conditions shaping them. The final task of the second foresight workshop was to sketch out a shared vision of a structurally changed freight transport system for Austria that would allow to attain the different policy targets by 2050. The third foresight workshop was dedicated to further specifying the vision of a structurally changed freight transport system by 2050, including the main actions necessary to achieve it. However, in the end, the focus was mainly on technological steps towards this vision.

The main mission of FVA 2050 was to identify relevant priorities for the upcoming process of setting the national technology research agenda for research and innovation funding. A final, rather normative exercise allowed to define more radical technological steps. The incremental key technology and innovation opportunities initially identified by an explorative method were thus complemented by a range of blue-sky and out-of-the-box technology and far horizon innovation opportunities. The foresight exercise created a vision for a structurally changed Austrian freight transport system by 2050 and drafted a range of socio-economic framework scenarios.

Finally, the major outcomes were a synopsis and a prospective assessment of key technologies and future innovation opportunities up to 2050 and beyond. Around 80 experts and stakeholders of the Austrian freight transport system participated in FVA 2050, an average of 30 participants in each workshop. The foresight was implemented by a consortium of six partners: the AIT Departments Foresight & Policy Development and Mobility, the Department of Logistics at the University of Applied Sciences in Upper Austria and the Department of Production Logistics Management at the University of Economics and Business in Vienna. ProgTrans AG from Switzerland delivered a transport demand outlook for 2050. Transver Gmbh delivered an environmental impact assessment referring to the transport demand trends of ProgTrans AG. Most partners had already been involved in the European funded foresight FreightVision Europe (2007–2009).

They were thus invited to propose a similar forwardlooking and foresight activity for Freight Transport and Logistics 2050 and beyond in Austria. The Ministry of Transport, Innovation and Technology (bmvit), the two major Austrian funding agencies (FFG, AWS) and the two major national rail and road infrastructure operators (OEBB, ASFINAG) assisted the foresight. They were all involved in an advisory board.

Shift to Rail versus Electrification of Road Transport

The foresight study Freight Vision Austria 2050 was performed during three large stakeholder workshops. Most of the stakeholders participated in all three workshops, which gave the exercise a particular continuity. Prior to each workshop a discussion paper was drafted by the consortium members and distributed among the participants. This discussion paper was based on desk analyses and outcomes of the preceding workshops.

The future dialogue started with an intensive discussion of the transport demand outlook presented at the first workshop. The prognosis anticipated a doubling of freight transport demand by 2050. This growth in freight transport demand can be expected to lead to a relevant increase in transport activities across all transport modes. An increasing shift to rail transport and even a bigger increase in road transport is estimated. Inland waterway transport is expected to remain at moderate levels due to exterior infrastructure.

The transport demand outlook and the projections of freight transport activities by 2050 were discussed controversially. On the one hand, the experts agreed that a significant increase in transport could be expected to come with economic growth. On the other hand, the experts questioned the anticipated doubling of trans-European freight transport, pointing out that a return to a regionalisation of production networks and supply chains could change the trend. However, the outlook gave definite alert that freight transport is expected to increase until 2050. Particularly on the main axes, transport infrastructure capacities in Austria may not at all be prepared to accommodate such growth.

The rather controversial discussion in the beginning motivated the preparation of four distinct socio-economic framework scenarios. At first, storylines were developed and elaborated into coherent stories of potential socioeconomic futures. In a second step, the scenarios were discussed regarding their overall feasibility. For example, the scenario on growth and liberalisation was assessed as less feasible than initially expected. The experts did not perceive it to be an option to leave freight transport futures to liberal markets alone; regulation and public policy were considered just as necessary to cope with increasing freight transport demand. Thus the second trend scenario on growth and regulation was seen as more feasible than the first scenario of full market liberalisation.

The experts anticipated a future of European freight transport where the primacy of the “free movement of goods” should no longer be interpreted as free choice among all means of transport along all European transport infrastructure axes. The Zurich Process for cross-alpine freight transport (CAFT) – a cooperation between the transport ministers of the alpine member states – was an example mentioned in this context. The experts pointed out that they explicitly expect a trans-European initiative to push the road to rail shift in the future.

Rising Oil Price as Moderate Driver towards New Technologies

Even more interesting was the dialogue regarding the two trend-breaking scenarios. The first of these socioeconomic scenarios was rather similar to trend break scenarios in other transport-related foresight exercises. None of the experts rated an oil price increase as a shock event but as a moderate driver towards technological alternatives such as the electrification of road transport or alternatively fuelled vehicles. Another discussion focussed on a return of regionalisation and local production networks. Instead of more European market integration, the shrinking of the internal market was seen as a potential socioeconomic future triggered by increasing global protectionism and global economic conflicts. By comparison, in 2009, such a socio-economic framework had not at all been envisioned in FreightVision Europe 2050.

In the second foresight workshop, the discussion focussed on relevant environmental and transport policy targets for freight transport futures. It was difficult to come to a conclusion. Although there are strong trends toward harmonising environmental and transport policy targets in the European multilevel governance system, there is obviously still an open debate whether these objectives ought to be seen as a planning horizon or as guidelines for the future. Policy targets at one policy level may conflict with policy targets at other levels. The involved stakeholder and expert group decided to take European policy targets in addition to national targets as a frame of reference while addressing this frame in a rather general way based on a shared vision of how to shape the Austrian freight transport system by 2050 (structural change) by taking into account an increase in freight transport demand by 30-40% by that time.

Towards a “Network of Networks”

As the core of this foresight process, a shared vision of the Austrian freight transport system in 2050 was blueprinted. The participants illustrated their ideas and visions in a group exercise and further discussed their ideas and expectations for the future. All illustrations were integrated in a single shared vision scenario. A European transport network will be achieved by 2050. European legislation will serve to drive and harmonise environmental and transport regulations. However, a single European transport network is expected to be achieved as a network of networks with a European main axes infrastructure network at its core, but tightly connected with inter-regional, regional and urban mobility networks. Communication and information technologies will progress and allow to more closely connect these networks while allowing for many alternative mobility patterns for travelling and transporting goods. In a far-distant perspective, private sector mobility and transport might decline since European industries can be expected to more strongly revolve around knowledge-based services.

In 2050, freight transport at medium (up to 300 km) and long distance (above 300 km) will be fully intermodal, with a considerable shift to rail transport. European infrastructure axes for all transport modes will be integrated into one single corridor network. Road transport (below 300 km) will be widely electrified with large numbers of charging stations providing the necessary infrastructure. However, electrification of road transport may not be feasible for heavy duty transport. Last-mile transport will still be mainly road-based and rely on individual transport modes. Automated systems and pipe networks are expected to be deployed in urban areas.

Logistics in 2050 will be organised rather centrally under strict rules and requirements set at the European level. Third parties are going to organise logistics in crossregional or regional and urban distribution networks. Large interregional distribution centres will be established on a European scale. Tri- and bimodal hubs will be situated along the main transport corridors near manufacturing sites and will profit from information and communication concentration and renewable energy clusters (smart grids). Significantly improved freight demand management will reduce empty and half-full trips; this will include alternative modes of operation, for instance so-called milk runs for circular distribution.

Another main exercise in the foresight FVA2050 was to sketch a list of technology trends in the near (2020), medium (2035) and distant future (2050). The main areas discussed in the transport-related technology and innovation debate were:
· Intelligent transport systems
· Green freight and logistics
· Intermodal freight transportation
· Innovative infrastructure technologies

In these areas, particular technology and innovation pathways were assessed. Communication and information technologies as well as alternative vehicles and new materials were introduced as enabling technologies.

Smart Technologies to Improve Capacity, Greening and Safety

From 2020 to 2035, supply and transport chains will be further “smartened” by ICT. Information management systems will enable systems that calculate ecological impact. Between 2035 and 2050, most infrastructure and freight vehicles will be equipped with communication modules enabling real-time multimodal transport information. Autonomous and semi-autonomous vehicle systems are expected to increase capacity and safety by platooning. A similar revolution like the container will provide new opportunities for intermodal transport with swap bodies to serve the European internal market. Automated harbour and hinterland transport, including vertical and horizontal loading systems, is expected to allow 24-hour operation. A European transport network will include a Europe-wide network of intermodal transport hubs. Transport infrastructure will be connected to energy infrastructure as a smart mobility/energy grid. In a distant perspective, from 2035, distributive intelligence in command and control will give rise to decentralised robot systems: smart objects, pipe networks and other simple track systems.

New Alternatives for Distances above 300 km

One of the key questions raised in FVA 2050 was if electrification of road freight transport might also be viable at medium and long distances in the future – a measure that is thought to play a significant role in achieving future European CO2 emission reduction targets. Experts believe that a shift to rail freight transport for distances above 300 km and even below 300 km for regional distribution will be a significant option in the long term. However, additional measures are required, for instance, regional rail/road distribution centres serving the first and last mile by an electric fleet. This has direct implications for future mobility and transport as well as transport-related technology and innovation policies.

Download the brief: EFP Brief No. 231_FreightVision Austria 2050.

Sources and References

COM(2011) 144: White Paper. Roadmap to a Single European Transport Area – Towards a competitive and resource efficient transport system, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0144:FIN:EN:PDF

Seibt, C., Rath, B., Wilhelmer, D., Zajicek, J., Toplak, W., Hofmann-Porkopczyk, H., Starkl, F., Bauer, G., Stefan, K., Schmiele, J. (2012): Freight Vision Austria 2050. Final Report. AIT Report No. 42, Vienna, see www.ait.ac.at/fva2050

EFP Brief No. 203: Competitiveness Monitor: an integrated Foresight Platform for the German Leading-edge Cluster in Logistics

Monday, December 5th, 2011

In 2010, the German Federal Ministry of Education and Research launched Germany’s biggest research initiative in the area of logistics and supply chain management. A broad range of companies and research institutes are participating in a cluster aimed at shaping a sustainable future for the region, the logistics industry and beyond. We will present the current concept of the joint research project Competitiveness Monitor, its planned architecture, and its expected contribution to the cluster, the foresight field, and the community involved.

The Leading-edge Cluster in Logistics

The EffizienzCluster LogistikRuhr is synonymous for the leading-edge cluster in logistics and supply chain management (SCM) in the German Ruhr area (larger Rhine-Ruhr metropolitan region of more than 12 million people in North Rhine-Westphalia). Like all leading-edge clusters, it aims to boost innovation and economic growth in Germany by bridging the gap between science and industry (BMBF 2010). Through strategic partnerships between research institutions, companies, and other stakeholders, it fosters research with innovative potential relevant for future developments. Although leading-edge clusters are regional concentrations within Germany, they contribute to finding new ways to growth and employment that gear not only Germany’s but the European Union’s economy towards greater sustainability.

The global goal of the EffizienzCluster LogistikRuhr is to secure individuality in terms of mobility and distribution in the world of tomorrow with 75% of the resources required today. Supported by the German Federal Ministry for Education and Research, the cluster aims at utilising the joint innovation capacity of scientific institutions and a variety of companies, including many small and medium size enterprises. In their work, the cluster participants address the conflict between future individuality (i.e. the demand side) and resource scarcity (i.e. the supply side).

More than 130 stakeholders from academia and business are participating in order to tackle the three central challenges: (1) efficient management of resources, (2) secure urban supply and (3) facilitation of individuality in mobility. In order to reduce the complexity associated with these challenges, each joint research project belongs to one of seven lead topics. These lead topics represent the central innovation schemes enabling the cluster to realise its ambitious target. Figure 1 illustrates the seven lead topics and their strategic position in relation to the three challenges identified.

As illustrated in Figure 1, different lead topics have different strategic roles in tackling the three central challenges. In this paper, we focus on the lead topic ‘Activation of Cluster Potentials’ as this is the area where the Competitiveness Monitor (CoMo) belongs and to which it contributes. The research project CoMo has set out to develop a foresight toolbox that builds futures knowledge around the three central challenges and supports cluster stakeholders in evaluating new strategies, processes and technologies in light of these challenges. While all innovations in the EffizienzCluster ultimately result in competitive advantages, the CoMo innovation especially intends to increase foresight potential and future robustness in decision making within the cluster. The integration of three foresight tools into a future-oriented IT platform where academia, business and politics co-operate will ensure a sustainable competitive advantage for all stakeholders in the leading-edge cluster on logistics and supply chain management.

The Need for Futures Orientation in Logistics

Logistics has developed from its role of delivering the right things at the right time to deciding how the right things get there in the right time (ECM 2010). During the past 50 years, logistics has evolved from individually managed, product-flow related activities to an integrated set of processes managed across the multiple echelons of a supply chain. The future of the logistics industry is characterised by many upcoming challenges and opportunities (e.g. Ruske et al. 2010). Due to the increased competition in the industry, its business has become more volatile and uncertain. In addition, the trend towards globalisation has steadily increased resulting in longer and more complex supply chains (Meixell and Gargeya 2005). Moreover, advancements in information and communication technology are currently revolutionising logistics processes. Intelligent solutions based on information and communication technology (ICT) are an essential operation, control and support instrument of such worldwide networks. Conclusively, logistics nowadays means acting in complex networks of independent but interdependent organisations. To manage these systems efficiently is one of the major challenges for the logistics service industry today.

Given all these facts, there is a considerable need for futures orientation and innovation in logistics. Innovation is an important driver of growth and competitive advantages across all industries, and its impact has significantly increased in the course of the current cutthroat competition in the logistics service industry. In best practice, both innovation management and futures research are linked and contribute to each other (von der Gracht et al. 2010). Futures research helps to cope with uncertainty in the business environment and enables actors to react faster to future developments to realise competitive advantages.

However, the potential of futures research in logistics has by no means been fully realised yet. As a consequence of increased uncertainty, the majority of logistics planners are currently unsatisfied with their planning and forecasting tools and feel that they have to change planning practices in the future. In fact, there is a strong demand to apply new and innovative techniques in strategic logistics planning.

The CoMo addresses the need for innovative foresight methods in strategic logistics planning. Importantly, this is facilitated in an innovative environment provided by the leading-edge cluster in logistics. Thus, the CoMo is not only an innovation in itself but establishes a direct link between the futures field, the cluster and innovation management for a hundred innovations of the future.

Competitiveness Monitor

The CoMo is, in the first instance, a joint research project aiming to create and convey future-oriented knowledge within the cluster. It comprises a future-oriented IT platform where science, business and politics cooperate to ensure a sustainable competitive advantage for all stakeholders and support innovations in the leading-edge cluster. This translates into four major challenges for CoMo:

(1) Creating, linking and processing information about future macro- and microeconomic developments in logistics and its environment

(2) Providing educative information on futures studies and teaching future skills

(3) Incentivizing stakeholders to systematically deal with their futures and foster innovation

(4) Stimulating cooperation among stakeholders

In order to address these challenges, we developed a CoMo architecture that integrates three innovative foresight tools. The structure and interrelation of the tools is illustrated in Figure 2 and elaborated on in the subsequent sections.

Since June 2010, the joint project team has been involved in intense scientific desk research and analysis, requirement analyses, conceptual development as well as multiple participatory workshop sessions with external experts. So far, a solid foundation for the CoMo joint research project has been established. Roughly 1,000 ideas (or requirements) for tool functionalities and interfaces have been identified, classified and prioritised. Requirements have been classified according to applications (Futures Platform, Trend Database, Future Workshop, Prediction Markets, or app-interlinkages), type (functional, non-functional or constraint) and categorical purpose (e.g. user collaboration). A three dimensional framework consisting of (1) feasibility, (2) innovativeness and (3) importance was developed to narrow down and evaluate requirements. The outcome and status quo of our analysis together with related theoretical foundations are discussed in the following sections.

Futures Platform

Our Futures Platform is intended to serve as the users’ personalised login portal. Users can interactively individualise their Futures Platform according to their interests by, for instance, saving trend favourites, displaying related information or following a certain Prediction Market. This flexible and individualised structure offers an individual decision-making environment that increases ease and encourages overall use. Furthermore, users communicate directly through the Futures Platform to elaborate on future-relevant topics. The three applications Trend Database, Future Workshop and Prediction Market are linked to the platform and can be accessed from there; users can ask experts to help them get started and assist them in applying these tools.

Since the provided tools are of an innovative kind, the platform will include an educational self-learning package, structured in a curricular form. This educational part will reduce uncertainty and assure that newcomers to strategic planning and foresight can use the platform to build foresight competencies.

Trend Database

Our Trend Database concept represents the quantitative and qualitative pool of future-relevant knowledge that is provided to and by the cluster actors. A user may query future-oriented numbers, data and facts about specific logistics-related topics or weak signals, wildcards and disruptive events. Similarly to the Futures Platform, the Trend Database embodies elements for users to cooperate. By allowing and encouraging users to share individual wisdom, overall wisdom increases (Surowiecki 2004). Another characteristic feature of the Trend Database is the linkage of its architecture in three dimensions using a semantic structure: (1) the linkage of trends among each other, (2) the linkage of the Trend Database with the tools Prediction Market and Future Workshop, and (3) the linkage of the Trend Database with external data pools.

In sum, the Trend Database will perform the function of an intelligent unit within the CoMo that generates and links future-relevant knowledge facilitating cooperation among the stakeholders of the cluster and reducing complexity. The possibility to acknowledge trends early and systematically creates significant competitive advantages for the cluster and ensures sustainable management and action in the field of logistics.

Future Workshop

The Future Workshop app represents the element of CoMo where trends are systematically projected into individual futures and recommended options and actions can be derived. The fundamental idea of a Future Workshop was developed by Robert Jungk, Ruediger Lutz and Norbert R. Muellert in the 1970s (originally termed “Zukunftswerkstatt” in German; Jungk and Muellert 1988). Our internal analysis as well as experience from the expert workshops has shown that scenario planning, roadmapping, backcasting and Imagineering provide valuable elements for a Future Workshop. This led us to consider best practices from these four approaches in designing the Future Workshop in order to establish a valid and reliable web-based foresight process.

Our Future Workshop app will allow users to use the Trend Database as a discussion basis and digitally collaborate in global or private workshop environments. Stakeholders of the cluster, for example from a certain company, are led through a process of problem identification, innovation and creativity towards problem solving while spatial boundaries are overcome. In the process, Future Workshops will facilitate a future-oriented strategic logistics planning.

Prediction Market

The requirement analysis for the CoMo Prediction Market app revealed promising applications for stakeholders in the leading-edge cluster. Our CoMo Prediction Market app will supplement Future Workshops and the Trend Database by providing an innovative foresight method that generates futures knowledge and by complementing the CoMo platform. Prediction markets originally evolved in psephology and proved to provide significantly better forecasts than classical opinion polls – for this reason, they have recently been transferred into the business world (Ho and Chen 2007). In the Prediction Market app, CoMo users will be able to bet on the outcome of future events in a virtual environment. A single stock price represents the aggregated wisdom/knowledge of all market players while competition in the market ensures efficiency in aggregating asymmetrically distributed information.

Platform to Enhance Future-oriented Decision-making

The CoMo will provide a platform that utilises the cluster’s unique combination of more than 130 partners from business, academia and politics in order to share complementary resources, specifically to share knowledge that is relevant to their future-oriented decisions. The combination of a Trend Database, a Future Workshop app, and a Prediction Market app will facilitate cooperation, will provide a shared future-relevant knowledge base, and individual future-oriented decision support. Ultimately, the CoMo contributes to the major goal of the leading-edge cluster by enhancing the quality of the stakeholders’ future-oriented decisions.

Authors: Dr. Heiko von der Gracht        heiko.vondergracht@ebs.edu

Stefanie Mauksch                   stefanie.mauksch@ebs.edu

Philipp Ecken                                                philipp.ecken@ebs.edu

Christoph Markmann               christoph.markmann@ebs.edu

Gianluca De Lorenzis                        G.DeLorenzis@dilotec.de

Eckard Foltin                                      eckard.foltin@bayer.com

Michael Münnich                   M.Muennich@brainnet.com

Dr. Christopher Stillings                      christopher.stillings@bayer.com

Sponsors: German Federal Ministry of Education and Research (BMBF)1
Type: National Foresight Project
Organizer: EBS Business School / Center for Futures Studies and Knowledge Management (CEFU)
Duration: 06/10-05/13 Budget: 2.3 m € Time Horizon: long-term Date of Brief: Oct 2011  

 

Download EFP Brief No. 203_Competitiveness Monitor

References

BMBF (2010). Germany’s Leading-Edge Clusters. Division for New Innovation Support Instruments and Programmes. Berlin, Bonn, Bundesministerium für Bildung und Forschung / Federal Ministry of Education and Research (BMBF).

ECM (2010). 100 Innovationen für die Logistik von Morgen. Mülheim an der Ruhr, Dortmund, EffizienzCluster Management GmbH.

Ho, T.-H. und K.-Y. Chen (2007). New Product Blockbusters: The Magic and Science of Prediction Markets California Management Review 50(1): 144-158.

Jungk, R. and N. Muellert (1988). Future workshops: How to Create Desirable Futures. London, Institute for Social Inventions.

Meixell, M. J. and V. B. Gargeya (2005). Global supply chain design: A literature review and critique. Transportation Research Part E: Logistics and Transportation Review 41(6): 531-550.

Ruske, K.-D., P. Kauschke et al. (2010a). Transportation and Logistics 2030 – Volume 2: Transport infrastructure — Engine or hand brake for global supply chains? Duesseldorf, PricewaterhouseCoopers.

Surowiecki, J. (2004). The Wisdom of Crowds: Why the Many Are Smarter than the Few and How Collective Wisdom Shapes Business, Economies, Societies, and Nations. New York Doubleday.

von der Gracht, H. A., R. Vennemann et al. (2010). Corporate Foresight and Innovation Management: A Portfolio-Approach in Evaluating Organizational Development. Futures – The journal of policy, planning and futures studies 42(4): 380-393.

EFP Brief No. 188: Improving Foresight through Methodological Innovation

Wednesday, August 10th, 2011

We present insights into the design and execution of an international large-scale project on the future of logistics by the year 2025. The basis of our research was an innovative real-time Delphi application. We applied a multi-methodology framework including a real-time Delphi, a futures conference and participatory expert workshops. This allowed for cross-validation and a strong participatory inclusion of policy makers. An example shows how a multi-stakeholder environment can be approached using innovative foresight tools. We illustrate a research case study that aligns foresight activities with a rigorous scientific procedure.

Sound Planning Basis for Long-term Decisions in Logistics and Mobility

We present insights into the design and execution of a large-scale international project on the Future of Logistics 2025 (von der Gracht et al., 2008). We contribute to the foresight community with an innovative and profound research design: First, the research included one of the few and early real-time Delphi applications worldwide (see Gnatzy et al., 2011; Gordon & Pease, 2006) for which a web-based survey software was specifically developed. Second, the research employed a multi-methodology framework, including the real-time Delphi mentioned above, a futures conference and participatory expert workshops. This allowed for significant cross-validation and a strong participatory inclusion of policy makers. Third, it is shown exemplarily how a multi-stakeholder environment can be approached using such tools. Fourth, we illustrate a research case study that aligns foresight activities with a rigorous scientific procedure.

The project Future of Logistics 2025 was initiated in the course of CeMAT 2008, the world’s largest in-house logistics fair with approximately 60,000 attendants from 40 countries. This large-scale foresight project was organised with strong support from the German government, several research institutions, industry and Deutsche Messe (Hannover).

The research particularly focused on the linkage between the transportation and logistics industry and its expected socio-economic contributions in the future in the fields of sustainability, health care and social responsibility among others.

The aim of the project was to support companies to best prepare themselves for the future as well as weigh the risks of product innovations and entering new markets. Our approach includes projections of future trends based on extensive conversations amongst and evaluations by experts. Scenarios for different future options were developed and the consequences for the logistics market described.

We aimed to encourage experts from industry, academia and politics to discuss the future of the transportation and logistics markets, of the companies operating therein as well as of the economy in general. We demonstrate that long-term analyses of the logistics environment are highly meaningful since they help companies to orient themselves in complex and dynamic environments and therefore reduce perceived uncertainty. The analyses allow gaining a clearer picture of the future and identifying opportunities and threats. Our global scenario study has illuminated how top-level executives from business, academia and politics see the probable future and what major discontinuities could look like. It provides a sound planning basis for long-term decisions in logistics and mobility, demonstrates the value of scenarios as a management and planning tool, and exemplifies a systematic scenario development and communication process.

Innovative Real-time Delphi

The methodology consisted of several research phases that were interlinked and can be divided into a pre-, main-, and post-conference phase as described in Figure 1. The research initiative lasted for a total of approximately nine months.

The pre-phase included the development of the study concept, the programming of the real-time Delphi tool, a software pre-test, the recruitment of an international expert panel and the first part of the real-time Delphi survey itself among 300 internationally renowned experts (Part I). The project was launched in January 2008 when the study was designed and the online portal for the web-based Delphi survey was developed. After a pilot test, the Delphi-Internet portal opened on March 1, 2008. Everyone registered for the Future of Logistics International CeMAT Conference was sent a personal invitation link, giving them exclusive access to the Delphi portal. The experts from business, politics and academia were confronted with 20 projections in the following four subject areas: (1) economic developments, (2) political challenges, (3) socio-cultural trends and (4) technological innovations. The survey was conducted online with the help of a web-based application, which makes real-time evaluation possible. The participants were asked to assess the projections in terms of their expected probability, impact on the global economy and desirability using the ratings scale provided. They were also given the opportunity to justify their responses by providing comments.

The interim results of the survey were presented at the Future of Logistics Conference as part of the CeMAT trade fair in May 2008. Therefore, the main-conference phase with 216 attendants comprised an initial trend briefing with the Delphi survey results and their joint reflection in presentations and moderated rounds of discussions (2+1 keynotes), open discussions as well as discussions in small groups, “coffee worlds”, which is an innovative form of participatory workshop.

The post-conference phase, in turn, included a follow-up real-time Delphi (Part II). The online tool was available to the participants until the end of June 2008 so that they could modify their responses. Once the portal was closed, the final analysis and aggregation of all data, scenario development, discontinuity analysis and dissemination were conducted. Possible global future scenarios were drawn based on the Delphi data collected from the experts questioned. Conceivable opportunities and surprises were sketched out in detail. The opportunities represented future scenarios that can be actively shaped.

Figure 1: Process of the Future of Logistics 2025

We included extreme scenarios and wildcard scenarios in our analysis. Two projections (“Energy Sources” and “Global Water Crisis”) were selected for the former, both of which display a very high probability and impact. Four scenarios were developed out of these two projections (scenario axes), each of which describes a world that could come about. Furthermore, the wildcard scenarios described single events or developments that may seem improbable from today’s standpoint but ultimately cannot be ruled out. It is not about the probability of such events but the potential impact that they or similar occurrences could have. They could be the result of technological breakthroughs, social tension or political overthrows.

Opportunities and Discontinuities Key to Identifying Future Lines of Action

Our methodological design proves to be a profound foresight approach to research a complex and dynamic environment, such as the international transportation and logistics industry. The different research formats, several linkages and cross-validations as well as intense participatory reflections with policy makers enhanced the scope of the content and its penetration. Especially, the use of innovative approaches, such as the real-time Delphi and coffee worlds, stimulated the discourse significantly. The real-time Delphi alone generated 826 comments on 20 future projections, which were assessed by 65 participants. Overall, the situation in 16 countries from all continents was considered in the scenarios. Moreover, the web-based, real-time Delphi study was able to significantly streamline the process since all group opinion calculations were provided in real-time during the survey. Our contribution to the FTA debate is thus a methodological one by integrating multiple methodologies and designing and applying a real-time Delphi in a multi-stakeholder environment.

An analysis of the responses produced three clusters, each of which must be viewed very differently: (1) potential surprises (low-probability, high-impact cluster), (2) eventualities (medium-probability, high-impact cluster), and (3) expectations (high-probability, high-impact cluster). First, potential surprises are often neglected by companies because they are considered improbable, but they have a moderate to high impact if they do occur. The projections in this cluster all involve some kind of revolution – be it an educational revolution in developing countries, a health revolution brought about by global business coalitions, technical revolutions due to automation and digitisation or even terrorist attacks. Second, the occurrence of high-impact eventualities is not considered to be very likely, but they involve serious impacts. When they become the object of debate, a wide range of very controversial opinions usually emerges. In this study, the projections grouped under this cluster can be combined under the heading of “competition”. They revolve around the best access to resources, protectionism between spheres of interests and competing megacities. Finally, high-impact expectations are characterised by a high expected probability and high impact. They are of huge strategic importance to companies. Projections in this cluster included the availability of resources on all levels, from trained staff to energy and water. The respondents believe that the formation of industrial clusters and technical innovations will offer solutions to these urgent problems.

If we analyse the driving forces in the market environment and the developments we can expect to see on the market, we find opportunities in the form of possible ways for the logistics sector to innovate and invest in business development. These opportunities present future scenarios that can be actively shaped. Developing these opportunities broadens companies’ horizons for what may happen in the future in terms of products and services, strategies, processes and solutions. We analysed a selection of the most promising opportunities arising from the Future of Logistics Conference 2008. These are business areas that are either brand new and may at first seem rather unusual, on the one hand, or simply represent possible extensions of existing business areas, on the other. The course we take to equip ourselves for the future can be set today by developing such opportunities. Each company must decide individually which of these opportunities to pursue. The formulation of opportunities is a very creative process. Based on the results of the real-time Delphi and the material discussed at the Future of Logistics Conference 2008, 120 possible courses of action were identified for logistics in several creative workshops. Numerous areas were covered, including products and services, cooperations and networks, controlling and finance, people and culture, marketing and public relations.

Unlike many scenario studies, we also included discontinuities, which can take the form of surprising events or developments, such as natural disasters, innovations and their consequences, or societal changes. The financial crisis 2008/2009 can be classified as such a discontinuity. By excluding discontinuities, scenario planners run the risk of missing major additional opportunities.

Figure 2: Extreme Scenarios Future of Logistics 2025

By including discontinuities, companies can identify further alternatives and increase their ability to adapt to surprises. They help to broaden the perspective and to test the robustness of strategies and decisions. There are two common ways for companies to systematically consider discontinuities: extreme scenarios and wildcard scenarios. Both approaches have been included in the Future of Logistics project. Discontinuities have been considered based on the results of the Delphi and the debates at the conference.

Scenario axes are a widely recognised tool for constructing extreme scenarios in a coherent and systematic way. According to this instrument, scenario planners select two driving forces or key factors that are considered to be of particular interest for scenario considerations. These factors are then plotted on two axes, resulting in four different scenario quadrants. In the scope of this study, the projection about energy sources and a global water crisis were selected due to their high probability and impact rating as well as their topicality and momentousness – an assessment shared by many conference participants (Figure 2). The scenario writing process, i.e. the definition of scenario premises and the description of the scenarios, was supported by extensive desk research.

Wildcard scenarios describe single events or developments that may seem improbable from today’s standpoint but ultimately cannot be ruled out. The wildcards outlined in this study involved the fabbing society, terrorist attacks, the spread of a pandemic, and space logistics. For example, the disruption of logistical networks could have detrimental effects on the economy of a country. Such networks are therefore an attractive target for terrorists. Attacks on political, ideological or religious targets are possible at different points. Important hubs, such as seaports and airports, could be disabled by physical aggression. The same applies to bridges or tunnels that span narrow passages between geographical boundaries. Attacks on these targets could bring traffic to a complete standstill or greatly hinder transportation along the route affected.

Proves Useful Tool in Foresight

In our research, we aimed at closing a research gap with respect to future developments in the transportation and logistics industry. More specifically, two research questions guided our research: (1) How will the macro environment (political/legal, economic, socio-cultural and technological structure) of the logistics services industry change by 2025? (2) How will the micro environment (industrial structure) of the logistics services industry change by 2025? Based on empirical research, we examined possible events and developments, identified major factors and aggregated expert knowledge on the long-term future. We developed and applied a novel real-time Delphi application. We discussed the results in participatory workshops and a conference with experts from politics, academia and industry. We derived scenarios as well as recommendations for managers and governments.

Future foresight exercises should include an even broader range of participants. The real-time Delphi tool could be used to further encourage the discussion and dissemination process including application during the conference and participatory workshop sessions. The research, and especially scenario development, is mainly based on qualitative research, even though we provide statistical data to support our qualitative findings. Further quantitative data (e.g., with respect to cost implications and industry growth rates) may be included in the analyses to provide a more tangible basis for strategic planning.

The overall feedback of the participants in the research process was very positive. The experts welcomed the opportunity to share opinions and insights with the expert group assembled for this purpose and encouraged us to proceed with the approach. This led us to publish a study in 2008 to present the foresight process and its results to a broader public.

Authors: Dr. Heiko A. von der Gracht     heiko.vondergracht@ebs.edu

Dr. Inga-Lena Darkow              inga-lena.darkow@ebs.edu

Sponsors: Center for Futures Studies (CEFU), EBS Business School

Note: The research was supported by Deutsche Messe Hannover and organised around the world’s largest intralogistics fair CeMAT in 2008 – www.cemat.de

Type: Global scenario study, methodological innovation and case application, single issue
Organizer: EBS Business School, Center of Futures Studies, Dr. Heiko von der Gracht, heiko.vonderGracht@ebs.edu
Duration: Jan-Dec 2008 Budget: N/A Time Horizon: 2025 Date of Brief: March 2011

 

Download EFP Brief No. 188_Improving Foresight through Methodological Innovation

Sources and References

von der Gracht, H. A., Darkow, I.-L., Walter, S., Jahns, C. & Thomsen, E. (2008): Future of Logistics 2025: Global Scenarios. BrainNet Science Edition, St. Gallen.

Gnatzy, T., Warth, J. & von der Gracht, H. A. (2011): Validating an Innovative Real-Time Delphi Approach – A methodological comparison between real-time and conventional Delphi studies. In: Technological Forecasting & Social Change, corrected proof, in press.

Gordon, T. & Pease, A. (2006): RT Delphi: an efficient, “round-less” almost real time Delphi method. In: Technological Forecasting & Social Change 73, 321–333.