There is a contemporary saying in the military (attributed to a General  Robert H Barrow) that while “Amateurs  talk about tactics, professionals study logistics.” This sentiment runs as a thread through military history at least until the Chinese Military strategist Sun Zu who said that "The line between disorder and order lies in logistics…".

An element of the sequence of miscalculations that led to the nations of Europe stumbling into the First World War were the logistical fact of having to transport hundreds of thousands of troops, and equipment, to the military fronts, along a finite number of roads and railways. The process would take weeks which meant that the antagonists couldn’t risk waiting for the actual declaration of war before beginning mobilisation, for fear of being unprepared. Instead, mobilisation had to begin early, with menacing numbers of troops facing each other across the frontiers, in a nervous fashion that only exacerbated the explosive sensitivity of the situation. The inertia of the logistical necessity of the situation created an inevitability in the escalation of events.

Toyota is particularly renowned for the development of its just-in-time manufacturing technologies which effectively delivered high quality levels of manufacturing, which in turn permitted lower levels of inventory. The point was that inventory, in the form of “work-in-progress”, was stored in volume at each stage of the manufacturing process with the intention of meeting fluctuations in the manufacturing process. If the preceding step of the manufacturing process ceased, then the subsequent stages can continue operating for a few days or hours. The problem is that work-in-progress costs money, is inflexible, and hides problems.

Through improved manufacturing techniques Toyota made their manufacturing processes more flexible, and saved money by reducing inventory. The 2011 earthquake and subsequent Tsunami, in Japan, was a tragic event which also, as a secondary consideration compared to the human cost, exposed the vulnerability to disruption of highly distributed supply chains, combined with low levels of inventory. If a car has thousands of components, the absence of just one of those will be enough to halt the production line, which is why in March of 2011 a parts supply crunch at Toyota saw its Japanese production slump by 62.7%.

While talk of production lines might make logistics feel like a product of the “industrial age”, and irrelevant to this silicon age, increasingly through e-commerce we are disintermediating bricks-and-mortar retailers, and buying tangible (and intangible) “stuff” through the Internet. Whereas once corporate logistics largely saw the end-point as a physical outlet, now they see the end-point as the consumer’s home, to which online commodities are now delivered directly. Amazon is even considering using flying drones to deliver products to individuals.  

This actually extends the reach of the corporate logistics network directly to people’s homes, while also massively expanding its complexity by replacing the need to deliver to a limited number of shops, to many times more homes. Websites like Amazon are actually highly advanced, vertically integrated, demand management systems linking manufacturers, to logistics networks, to consumers in a more direct fashion than was associated with traditional retailers.

Furthermore, as firms have globalised, increasingly the various functions of the operation have been distributed globally, with, for example, design, innovation and marketing conducted in the home market, technical and customer support conducted in India, and manufacturing conducted in China. As the sub-operations have become geographically isolated the logic of maintaining them as core competences of the overall organization diminishes and instead: manufacturing can be outsourced to a specialist manufacturer; support to a support specialist; and logistics to a logistics specialist. When Apple Inc looked to replace Steve Jobs as CEO, it was Time Cook, an operations specialist, they promoted whose first key success with the company (before being promoted to CEO) was in reducing inventory from months, to days, outsourcing the components of the manufacturing network, in turn allowing Apple to get innovative products to market quicker.

The point here is that logistics matter; and they matter in a way that most of us never need to care about. Unless of course you are going to eat the food that grows in the fields around your house, unless you are only going to buy the products manufactured in your neighbouring village, logistics is central to all our lives. Malta is located a few miles to the south of one of the World’s busiest sea lanes, it is geographically almost at the heart of the Mediterranean, being close not only to markets in Europe, but also to those in northern Africa. Malta has a good international airport in close proximity to Malta Freeport which is the Mediterranean’s third largest transhipment port and one of Europe’s busiest ports. Malta also has a well-developed financial sector and a beneficial taxation regime for firms distributing dividends overseas.

While more can be done to improve Malta’s offering as a focal point for distribution networks, it is also clear that Malta is already a significant player as a logistics hub. It is with good reason that in the interview published in this edition of The Malta Business Weekly, Dr Herrera spoke of the potential of the logistics sector for Malta, and the right development could see logistics forming a key component of Malta’s economy over the next decade. This is why it is so important for the government to support the development of this important industry.