Logistics is big business

Randy Eck explained that "moving stuff" makes up 11 percent of the global gross domestic product.
Randy Eck explained that “moving stuff” makes up 11 percent of the global gross domestic product.

Think logistics is no big deal in terms of the global economy?

Think again.

Randy Eck, director of supply chain technology solutions for Intel, told MBA students May 12 that roughly 11 percent of the world’s gross domestic product is logistics: “just moving stuff.”

That percentage translates to $9 trillion – 25 times as much as the $350 billion accounted for by the semiconductor industry, Eck said.

Eck and another member of Intel’s Customer, Planning and Logistics Group, Cliff Parrish, gave an evening presentation in Austin Hall’s Robert Family Events Room regarding Intel’s approach to supply chain management. Parrish is the company’s product and customer data manager.

Eck and Parrish’s group handles the transportation and warehousing of the materials Intel needs. For a company of Intel’s size and scope, the responsibility is big business to say the least. If supply chain efficiencies result in even a 1 percent increase in gross margin, that means an additional $500 million in revenue, Parrish noted.

Those efficiencies can be gained, Eck pointed out, through moves as simple as giving truck drivers instruction on how to shift gears in ways that require engines to use less fuel.

A fundamental issue logisticians must deal with, the pair told the students, is balancing service with effective cost management.

Parrish provided an outline for successful strategizing, which begins with the vision to see what success is. From there comes the development of goals and objectives and an “environmental scan” to determine what obstacles are in place. Next comes making a strategy, and following that is “strategic exploration” to see if there’s an even better strategy out there than the one you’re using. Then you need a roadmap for executing the strategy and ways to measure performance. And communication is the oil in the engine – without it, nothing happens.

Other topics the pair touched on included the “Internet of Things” – the ever-growing collection of smart devices that share data with one another to create systems of systems – and Moore’s Law.

Moore’s Law is a 1965 prediction by Intel co-founder Gordon Moore that transistor size would be cut in half every two years, doubling the computing power of an integrated circuit while vastly improving its performance and efficiency. Fifty years later, the prediction has so far proven true.

Cliff Parrish noted that without communication, any strategy will fail.
Cliff Parrish noted that without communication, any strategy will fail.

Putting it in perspective, if a Volkswagen Beetle had improved at the same exponential rate as microchips, the car would now be capable of 2 million miles per gallon and 300,000 miles per hour.

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