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Research proposal: Topic, aims, and overview of research

Topic: The role of logistics in developing regional clusters and economic activity.
Overview:
Many Regions have used cluster theory to provide a framework for sustainable economic
growth and this research aims to explore the role of logistics in this approach in clusters.
In particular, the research will explore the role of Value Added Logistics or postponed
manufacturing and its potential contribution to sustainable growth in a global context. How?

As a key element of global industry collaboration. The landscape of the global


economy has been changed by the shifting of manufacturing capability from the West
to the East. Hence to adapt to the new environment, regions in the West, such as
Humberside will need to realign its logistics infrastructure to develop new logistics
channels. This proposed research aims to evaluate industry cluster linkages between
regions to create multi-regional clusters via value added logistics. The capabilities
and resources from each region could therefore be fully utilized to improve trade. For
example, the chemical sectors of the Humber region and North East China being
linked with bulk consignments being shipped from China to the Humber ports for
finalization before reaching the market.
As a key driver of improved responsiveness and cost-efficiency. With the
development of globalisation and logistics technologies, physical distance has lost its
significance. This approach endorses Christophers (2005) view that companies no
longer compete with companies but supply chains compete with supply chains. This
research will explore whether this view extends to clusters whereby elements of the
same cluster can be fulfilled in spread geographies.
As a key driver of the regeneration agenda. Value added logistics is assessed to
be one of targeted competitive sectors of Hull (IBM Presentation, 2006). The Humber
region has strong potential with its position close to the market and cost
competitiveness. However, more efforts should be made to position the Humber
region as a strong logistics hub or gateway to UK. By focusing on value added
logistics, the unique competitive advantage could be fully utilized.

Being in the Humber trade zone, the University of Hull Logistics Institute (UHLI), which is
the only dedicated logistics institute in the North of England, also one of the worlds only
five dedicated logistics institutes, is obviously the perfect place for this research to be
carried out. One year of enjoyable and substantial study in the Business School has given
me confidence in the excellent resources and instructions of the Logistics Institute and the
Business School.
Benefits of this research:

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Research proposal: The role of logistics in developing regional clusters and economic activity

Development of cluster theory and value added logistics practices.


Generation of new business concepts in the Humber area.
Enhancement of the international profile of the University and the region.

Relationship to previous work


Why value added logistics?
Todays customers seem to be more and more unreasonable. They are becoming expert
buyers in every field. They want more variety of products, they want better quality with
cheaper prices, and they want them RIGHT NOW. If a business fails to meet the level of
responsiveness of todays more and more turbulent market, it will almost definitely be
forced out of the market (Christopher, 2005). The challenge to business leaders is to
improve their logistics operations to increase responsiveness to customer demand and
lower the cost as well.
What is value added logistics?
Verwoerd, W (1999) defines value added logistics as a concept to reorganize the logistics
chain in a different, more integrated way to lower the total costs (interest of inventories,
material handling, and transportation) and to increase the service levels. This is based on
the idea that production should be split into two parts:

Primary production (parts and subassemblies)


Secondary production (assembly and customization). This secondary production is
very often combined with distribution activities.

Value added logistics, also known as postponement manufacturing, is currently a hot topic
in the logistics field. There are two types of postponement which constitute value added
logistics, namely logistics postponement and form postponement. (van Hoek, R., 1998;
Christopher, M., 2005)

Logistics Postponement is the consolidation of finished products into a limited


number of places in anticipation for customer orders.
Form Postponement is the delaying of final configuration of the product until final
orders from customer are received.

With value added logistics, high levels of responsiveness can be achieved with lower cost.
A wider range of products for customer to choose from and a higher level of customization
are also possible with value added logistics (Christopher, 2005). The case of a paint
manufacturer such as ICI serves as a good example here: with a relatively small number
of base colours stored at the retail outlet, customers can mix almost any colour they want
without waiting for days for delivery, because ICI doesnt finalise the paint until the
customer arrives, and their ordered colour can be produced quickly via a mixing machine
(Christopher, 2005).
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Research proposal: The role of logistics in developing regional clusters and economic activity

Globalisation and value added logistics


As the era of globalisation unfurls, the concept of value added logistics is becoming even
more important. Grant, et al. (2006) suggest that attempts to seek markets opportunities
have been made due to the fact that the industrialized nations have matured that is to
say, their economic growth rates have slackened. Manufacturers have increased new
material and component acquisition from other countries (i.e. global sourcing). A global
financial network has developed that allows multinational enterprises to expand their
operations (Grant, et al., 2006).

The implementation path which is commonly followed by European companies.


Source: Harrison and van Hoek, 1999
This issue has been further described by Harrison and van Hoek (1999) as no longer
being satisfied with developing new markets overseas and cheap raw material sources,
businesses are rationalizing their sourcing, producing and marketing worldwide. Value
added logistics is effective here. With semi-finished products produced near the source

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Research proposal: The role of logistics in developing regional clusters and economic activity

where labor and materials are relatively cheap and final customization done near the
market where the end customers suddenly place orders, the supply chain benefits from
both improved responsiveness to the demand and minimal cost. As in the example of Dell,
who achieve both market-responsiveness and cost-efficiency by having the products
designed so that they can be produced as generic but unfinished units and finalised only
when the final order is placed (Christopher, 2005).
Chinas economic rise and the growth in outsourcing
China has been undergoing tremendous economic and social changes with an average
10 per cent growth in GDP, and 18 per cent increase in trade from 1980 to 2005 (China
Trade Statistics). And for Chinas logistics industry, there has been a growth at an annual
rate of 15-30 percent during 2000 to 2004 (China Federation of Logistics and Purchasing
2004). The huge growth in economic development and outsourcing activities to China, is
evident from the increased export goods movements. From the following list of Lloyds
special report of the Worlds top 20 container ports, which was released earlier this year,
this trend is illustrated (Lloyds List special report, 2007).
According to data from 2005, China, including Hong Kong, represented 23% of world
throughput. Which means one in four container movements in the world was in that
region, In contrast, if you go back to 1980 that regions share was a mere 4% of the world
throughput (Lloyds List special report, 2007).

Source: Lloyds List special report. Mar 15, 2007. Top container ports
Efforts have been made to improve logistics capabilities in China. For example, the China
Communications and Transport Association (CCTA) has developed a link with the United
Kingdoms Chartered Institute of Logistics and Transport (CILT) to deliver CILT
qualifications to Chinese logisticians (Grant, et al 2006).

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Research proposal: The role of logistics in developing regional clusters and economic activity

Chinas movement to value added logistics and the future of global outsourcing
Both opportunities and challenges arise in the backdrop of global sourcing development:
China has the low-manufacturing-cost advantage, however, the long lead-time and high
transportation-costs have been driving businesses away. As suggested by Christopher, et
al (2006), value added logistics tend to be the cure for the sectors longer lead-time. For
example, Woolworths makes its plastic Christmas tree orders 6 months in advance and
applies lean manufacturing to lower the cost. And in HPs case, the postponement
concept is used at its four regional centres around the world. Moreover, as there is no
longer a one size for all case, each business and even each product will eventually have
its own supply chain strategy according to its unique characteristics (Christopher, et al
2006). Thus without doubt, value added logistics has raised unique opportunities for
different regions all over the world.
The Humber region
The Humber estuary is a well accepted geographical unitary feature contrasting a
complex and fragmented political and economic reality. The ports of Hull, Grimsby,
Immingham and Goole combine as the UKs main port complex (Humber Forum, 2007).
As the largest ports conurbation in the UK, the Humber handles 80 million tonnes of
freight out of a UK total of over 550 million tonnes every year. It is likely to get even busier
as traffic shifts north from the congested ports and roads of southern Britain (Hull Logistics
Institute, 2006).

Neta map (North European Trade Axis) highlighting the Humber in relation to the EU and E20

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Research proposal: The role of logistics in developing regional clusters and economic activity

The Humber is in the middle of England and a circle with a radius of 3 hours drive from the
Humber covers 40 million of the population and most of the major cities in the UK. This
fact gives the Humber an advantage of close access to the UK market.
Also, currently 85% of the deep sea containers to the UK arrive at southern ports, and
65% of the landed containers have to travel north by road or rail through the most
congested region near London for distribution across the country. An alternative strategy
maybe to have the containers arrive at and distributed from the Humber, considering the
mileage saved and improved efficiency. This is why B&Q, a Southampton based company
has 100% of its containers transported through Humber to reach its nationwide distribution
centres.
The Hull and Humber Ports City Region has been identified in the Governments Northern
Way Strategy as a Global Gateway linking the North of England, the UK Midlands and
Scotland to the world. the E20 corridor it provides connectivity from Limerick in the West
of Ireland to Northern Europe and the expanded European Union States of the Baltic
region.
Multi-regional clusters and potential linkages between Humber and N E China
As Porter (1998) defined, clusters are geographic concentrations of interconnected
companies and institutions in a particular field. Poor countries lack well-developed
clusters; they compete in the world market with cheap labour and natural resources. To
move beyond this stage, the development of well-functioning clusters is essential.
Clusters become an especially controlling factor for countries moving from a
middle-income to an advanced economy. Meanwhile, Hkanson (2005) argues that
clusters consist of and are defined by the value-adding activities in a set of linked
companies and institutions.
Both definitions of clusters emphasizes geographic proximity, which concerns spatial
separation and relations in terms of distance. However, the development of logistics
technologies such as container shipping have made the world smaller and the world
economy bigger (Levinson, 2006). Moreover, the limitation of the long lead-times of global
transportation could be further minimized by the application of value added logistics
(Harrison and van Hoek 1999; Christopher, 2005).
With added value logistics reducing the constraints of geographic distance, the proposed
research will evaluate the viability of the concept of multi-regional clusters which can be
defined as clusters that spread supply chain dynamics between more than one regional
base.
The development of multi-regional clusters theory could offer potential for the union of
regions from different parts of the world, for example, Humberside and Northeast China.
There are several similarities between the Humber region and North East China.

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Research proposal: The role of logistics in developing regional clusters and economic activity

Both areas are focused on regeneration or, recovery strategies from industrial decline.
Both have access to large consumer populations.
Both share similar specific sectors such as the chemical industry.

In comparing clusters in the same industry, the European ceramic tile clusters located in
Spain (Castellon) and Italy (Emilia-Romagna), Hervs-Oliver, et al. (2007) indicate that
clusters have a unique set of resources and capabilities and a certain performance level.
On the whole, a cluster's unique set of resources and capabilities matter.
It is proposed that empirical research is conducted to examine potential links between
clusters in different parts of the world to create multi-regional clusters and take advantage
of the resources and capabilities from both worlds. Northeast China is looking for logistics
hubs close to markets, while the Humber as a UK hub is also in need of cheaper sources.
Could value added logistics be a link between the two regions to form a multi-regional
cluster? By studying this particular context, it is intended that the theory developed will be
generalisable, and therefore valid in other geographic locations.
A model of value added logistics is suggested and to instigate the proposed research:
Primary production from SMEs

Distribution to customers

Postponed finalization at the Humber


Source & Supply

Demand
Information flows
Financial flows
Physical flows
Product life cycle

Proposed research questions:


Can value added logistics create sustainable partnership links between the Humber
region and NE China.
Which industries (or clusters) and which shareholder groups will benefit from value
added logistics and postponement manufacturing?
What are the drivers for SMEs in the Humber and the North East China to go value

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Research proposal: The role of logistics in developing regional clusters and economic activity

added logistics?
Does the proposed multi-regional cluster theory apply to other regions and industries,
for example: the automotive industry clusters of Indian and American; or the food
industry clusters of Brazil and the Gulf states?
What are the policy decisions that can influence success in value added logistics?
Example: Tax free zones; economic incentives and subsidies.
What are the constraints and risks of implementing value added logistics?
Is there a route map for successful implementation?

Methodology
This section addresses methods to be adopted in addressing the selected research
questions.
Mangan, et al. (2004) propose a mix of both quantitative and qualitative methods be used
for logistics research. It has also been pointed out by Naslund (2002) that it is necessary
to use both quantitative and qualitative methods if we really need to develop and advance
logistics research. Moreover, employing both quantitative and qualitative techniques
enables methodological triangulation, to provide for generalization of the findings (Mangan
et al, 2004).
The proposed methodology adopts a case study strategy. A case study is an empirical
inquiry that investigates a contemporary phenomenon within its real-life context,
especially when the boundaries between phenomenon and context are not clearly evident,
(Yin, R. 2003). Stuart, et al (2002) argue that the case research methodology is both
appropriate and essential where either theory does not yet exist, or where theory exists
but the environmental context is different, or where cause and effect are in doubt or
involve time lags.
Stuart, et al. (2002) suggest the process of case study research should be broken down
into five critical stages as illustrated:

The first stage of the research process involves defining the research question. Having
defined the research question, the case-based investigator needs to develop
measurement instruments to capture data for future analysis. The second step in
conducting case research is the development of a research instrument and selection of
appropriate field sites. The third stage is data gathering via selected quantitative and/or
qualitative methods. Stage 4 involves analyzing the data, to determine what has been
learned and how to present it. This is integral to a researchers task and may take a great
deal of time and effort. The last stage is actually writing the dissertation.

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Research proposal: The role of logistics in developing regional clusters and economic activity

As advised by Yin, R. (2003), multiple-case designs may be preferred over single-case


designs. This will enable greater generalisability of the research findings. Case studies will
be conducted at UHLI member companies, such as the GBA Group based in Grimsby who
currently provide value-added logistics for Kia, the car manufacturer to tailor their cars for
the UK market. GBA have expressed an interest in the proposed research.

Plan of work
The proposed plan of work in 5 stages follows the case study model offered by Stuart, I. et
al (2002)

Stage1
Stage2
Stage3
Stage4
Stage5

Year 1

Year 2

Year 3

Proposed schedule of study

Stage 1. Define the research topic and questions.


o Agree research topic and clarify objectives, scope and an abstract.
o Preliminary literature review. Extensive reading at this stage will generate
more questions.
o Key questions. This research should establish a framework of key
questions as early as possible.

Stage 2. Instrument development.


o Survey: I would plan to develop a framework of questions to be put to the
local SME community and, logistics practitioners to evaluate the theory.
o Business Model review. Many regeneration models use Retail as a
primary driver. For example, Hull, Dalian and in the Gulf.
o Face to face interviews.

Stage 3. Data gathering. This research topic depends on more than one location to
generate relevant data. Whilst the same methodology will be employed, access to
information may differ. Data gathering is an iterative process and this research should
allow scope for adjustments throughout.

Stage 4. Analysis. This is where the key concepts and arguments will be evaluated

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Research proposal: The role of logistics in developing regional clusters and economic activity

through analysing the data collected. In fact, this cannot be postponed until the late
stages of research. A rigorous research instrument will be developed to enable
effective testing of hypotheses set.

Stage 5. Disseminate. I take this from the Stuart (2002)s model and would adapt it to
Write up in my own research.

Bibliography
CEFP (2004) - China Federation of Logistics and Purchasing, Circular released by
CFLP
China Customs (2004) China Trade Statistics, China Customs, Beijing
Christopher, M. (2005) Logistics and supply chain management, Prentice Hall
Christopher, M.; Peck, H.; Towill, D(2006) A taxonomy for selecting global supply
chain strategies The International Journal of Logistics Management Vol. 17 No. 2,
2006 pp. 277-287
Grant, D.; Lambert, D.; Stock, J. Ellram, L. (2006) Fundamentals of Logistics
Management McGraw Hill Higher Education; European Ed edition
Harrison, A. and van Hoek, R. (1999) Logistics Management and strategy, Prentice
Hall
Hervs-Oliver, Jos Luis - Albors-Garrigs, Jos (2007) 'Do clusters capabilities
matter? An empirical application of the resource-based view in clusters',
Entrepreneurship & Regional Development, 19:2, 113 - 136
Hkanson, L. (2005) Epistemic Communities and Cluster Dynamics: On the Role of
Knowledge in Industrial Districts Industry and Innovation. Sydney: Dec 2005.
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Hull.co.uk (2007) http://www.hull.co.uk/investing_economiclocation.aspx
Humber Forum (2007) http://www.humberforum.co.uk/feature.asp?id=152
IBM Presentaion (2006.9) Hull Competitive Assessment by IBM-PLI Commissioned
by Hull Citybuild
Invest In Hull Strike Gold (2006) Hull Citybuilt,
http://www.hullcitybuild.co.uk/p01_2_banner_rregion.asp?pageid=85
Levinson, M. (2006) The Box, Princeton University press, New Jersey.
ISBN-13:978-0-691-12324-0
Mangan, J.; Lalwani, C and Gardner, B (2004) Combining quantitative and qualitative
methodologies in logistics research, International Journal of Physical Distribution
Vol. 34 No.7, 2004 pp. 565-578
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Review, 1998, vol. 76, issue 6, p 77, ISSN 00178012.
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Research proposal: The role of logistics in developing regional clusters and economic activity

Stuart, I.; McCutcheon, D.; Handfield, R.; McLachlin R. and Samson D. (2002)
Effective case research in operations management: a process perspective Faculty
of Business, University of Victoria.
The McKinsey Quarterly 2006 special edition Serving the new Chinese consumer
The McKinsey Quarterly 2004 special edition What global executives think
The McKinsey Quarterly 2004 special edition China today
van Hoek, R. (1998) Reconfiguring the supply chain to implement postponed
manufacturing International Journal of Logistics Management. Ponte Vedra Beach:
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