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Peter Cochrane's Uncommon Sense: Logistics On The Move
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Despite all of our technological advances our ability to move goods and provide services across the planet is still performed in a Dickensian mode. The best estimate that I can derive sees about 47 per cent of the GDP of the entire planet wasted in transaction costs that include the logistics of moving atoms from one place to another. Across Europe the average truck fill and loading is only around 12 per cent, while in North American, with a far greater landmass, and dispersion of population, it rarely exceeds 17 per cent. So at a rough estimate we could take something between five and nine trucks off the road to relieve congestion and reduce our oil consumption. If you look at the energy demands of the Western world, then by far the greatest proportion is focused on the movement of goods and people, followed by the provision of services.
What seems to have happened is an echo of just about every other human activity where we start from a very simple compact and efficient basis and gradually build layer upon layer, logical step by logical step, more and more complexity until decades later the system is unrecognisable, unrecoverable, and incredibly inefficient. We have successfully revolutionised all aspects of production and manufacture, communication and commerce, and many other sectors, to reduce costs and increase efficiency. So logistics looks like the last frontier with little or no change (beyond containerisation) in the basic processes for hundreds of years. But it now seems to be next in line to be revolutionised by the introduction of electronic tagging and global tracking systems.
Starting from the introduction of RFID tags on individual goods spanning razors, running shoes and perishable items such as food and drink, through to the individual identification of pallets and containers, trucks and ships, we will realise new levels of flexibility and sophistication. In short, if the trucks knew where the boxes were, and the boxes knew where the trucks were, then we could achieve an aggregation of loading that would see a far greater efficiency for land sea and air transport. But it is not only trucks that suffer minimal average loads, so do containers and ships on the basis of our inability to efficiently, economically and safely mix loads from several customers into ship board containers. RFID tags and the introduction of communications to container sub-modules, coupled with GPS location devices, should give us that ability.
At this point we have to take care that when we reinvent the process of logistically organising our wealth distribution, we should do so on the basis of the optimisation of the whole and not the individual components parts. To date those people dealing with the insurance, finance, transport, loading schedules, communication and the paper work, take (almost) independent action at every stage. If there is any optimisation, it is done so in isolation on a stage-by-stage basis, but logistics is an inherently non-linear end-to-end process and such procedures lead to gross inefficiencies. In a future world of RFID and GPS we should aspire to optimize the whole end-to-end process, soup to nuts, start to finish. Not to do so will see huge losses of efficiency and inherent weaknesses in the overall process that could make the industry even less efficient that today.
The underlying bases of optimisation for linear systems, is to be able to optimise each individual component and then glue them together to realise an optima for the whole. Unfortunately logistics is grossly non-linear and the optimisation of the individual parts on an independent basis always leads to a sub-optimal solution overall. It is necessary with almost all none linear systems to optimize as an overall end-to-end system. The benefits that we might gain from such a global programme, which will no doubt take at least ten years to realise, will see a gross reduction in the 47 per cent GDP transaction wastage that we currently suffer. At a modest estimate we should be able to reduce such transaction cost to something approaching 20 per cent (and possibly even lower) using RFID, artificial intelligence, and artificial life software to manage our goods transportation. As with all other industrialisation, getting people and their inabilities out of the loop is vital if we are to see some significant change and advance.
Logistics is another one of those cases where human beings are less than adequate in organising things on a massive scale and where machines are far more capable. The danger we have to look out for is the introduction of brittleness brought about by the optimization of the wrong parameters. Today for example, the gasoline supplies of the Western World are stored on 4 and 18 wheelers. The refining of oil sees the production of petroleum, diesel oil and aviation fuel transferred immediately onto 18-wheeler trucks on demand, direct to road side petrol station that then fill up our cars. There is no intermediate reservoir or storage tanks, no back up. So any blip in the ability to produce, transport and deliver gasoline immediately realises a crisis.
Optimising systems on the basis of $$$ alone often turns out not to be good social engineering. We need to get a little smarter in the way we define and invoke efficiency if we are going avoid more sudden power blackouts, collapsing communications systems, shortfalls in oil supply. The next phase of optimisation could be even worse with very sudden collapses in a logistics industry that has over enthusiastically optimised the entire system into a state instability. The good news is we do actually know how to do it; we have the mathematics, models, technology and computer systems to create a future global logistic network that will provide for all societies exactly what is required. The trick is to define what we want wisely, and to makes sure that we are not driven by greed alone - we should not pursue a logistics optimisation that is based on money alone - it has to be about service and continuity of supply.
And finally, we have new and recent optimisation parameters for the global logistics industry that are of rapidly growing importance. The automated assurance of end-to-end security and safety will probably save more than any other parameter to date. The rising threat from terrorists and those involved in illegal immigration will mitigate the embedding of further layers of technology at every level to include bio and environmental sensors linked to the RFID and GPS systems. These I suspect will see the ultimate optimisation challenge - the saving of human life!
Dictated on CO1449 flying Newark NJ to Toronto, despatched to my PA as a sound file a Mississauga Ontario hotel, picked up as a text file a day later at Heathrow London by email, revised on the M25 heading home, and despatched to silicon.Com over my home LAN.