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SReport of the Panel on the
Transportation, Distribution, and
Logistics Services Industry
The Panel on Transportation, Distribution, and Logistics Services Industry
was made up of six members, including three members from NAB (two from
academia and one from industry), two other members from academia, and one from
industry. Three of the panel members were also members of the parent committee.
The panel was asked to assess the contributions of academic research to integrated
logistics services and associated activities, technologies, and methodologies that
cut across the many components of the transportation, distribution, and logistics
(TDL) services industries. The panel reviewed the literature, developed several
case studies, and sent a questionnaire to selected individuals, primarily university-
based researchers, with special knowledge of the TDL industry (Addendum). The
questionnaire was followed by two roundtables attended by panel members and
12 senior individuals in the TDL services industries (see Addendum).
During the past two decades, deregulation of transportation and rapid advances
in computing and communications technologies have resulted in a surge of innova-
tion in logistics and accelerated the pace of change in the broader TDL industries.
In manufacturing, reducing inventories and work-in-process through just-in-time
deliveries, "pull" systems of supply-chain management, and other technologies and
management practices depend on integrated-logistics services, which combine
materials management and physical distribution. Logistics has emerged as a dis-
tinct function in many companies and as a distinct service performed by integrated-
logistics service providers. Over time, the users of integrated-logistics services
have become more demanding, and, in response, providers have become more
sophisticated. Their use of technology and their need for knowledgeable workers
have created interest in and opportunities for academic research.
145
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146 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
DEFINITION OF THE INDUSTRY
Transportation, distnbution, and logistics services affect every facet of economic
life in the United States. In 2000, the United States spent about $1.006 trillion to move
freight. Trucking accounted for $481 billion, or about 48 percent of the total. Rail-
roads came in second, accounting for $36 billion, and international, inland, and
coastal water transportation was next at $26 billion (Delaney and Wilson, 2001~.
As a percentage of gross domestic product (GDP), transportation and inventory
costs have been declining since 1981, when total logistics costs in the United States,
including inventory carrying costs, transportation, and administrative costs, totaled
almost 17 percent of GDP. In 2000, the total was 10.1 percent (Delaney and Wilson,
2001~. By far the most important reason for the decline has been deregulation in the
rail and trucking industnes, but other factors such as de-unionization, advances in
technology, and improved management practices have also contributed (Berman and
Monaco, 2001~. Competition in transportation has not only created new incentives for
service providers to reduce costs and improve the quality of service, but has also
stimulated innovation in the types of services they provide. At the same time, compe-
tition in the retail and manufacturing sectors has forced service providers to reduce
costs, ensure faster inventory turns, reduce the amount of work-in-process to a mini-
mum, and operate in close coordination with suppliers. All of these measures have
been enabled by improvements in integrated logistics. Figure 5-1 shows the changes
in inventory, transportation, and administrative costs in the last 20 years.
10
9
8
6
5
4
3
2
1
-
o 1 ~ ~ ~
· GDP $ trillion (left scale)
· Logistics percentage of GDP
(right scale)
Total U.S. logistics costs
$ trillion (left scale)
- 20
- 18
- 16
- 14
12
10
8
- 6
- 4
- 2
- o
FIGURE 5-1 The cost of logistics in relation to GDP. Source: Cass Information Sys-
tems, 1999.
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 147
INTEGRATED LOGISTICS: A COMPETITIVE DIFFERENTIATOR
Because of the many changes in technology and management practices in the
TDL services industry, especially since deregulation, the panel decided to focus
on integrated logistics (also known as supply-chain management) and associated
activities, technologies, and methodologies that cut across the TDL services in-
dustry. Integrated logistics is becoming an increasingly important source of com-
petition in all parts of the TDL services sector, as well as in other sectors of the
economy and the national security establishment.
Two big changes laid the foundation for integrated-logistics services: (1) the
automation of transactions enabled by advances in information technology; and
(2) the deregulation of transportation. Deregulation has led to dramatically more
complex logistics decisions in many industries and a proliferation of transporta-
tion service providers, which has encouraged innovation in service delivery and
provided businesses with many more choices. Advances in information technol-
ogy have enabled businesses to accumulate vast amounts of data on every aspect
of their supply chains, from production to delivery. Efficient integration of sup-
ply, production, and delivery schedules with suppliers and customers requires the
effective management of these data.
Supply-chain activities can be categorized into three major areas: (1) the
acquisition of materials and supplies; (2) the manufacturing process; and (3) the
distribution of products. Supply-chain management is the integration of the flow
of materials, documents, information, and finances to optimize individual ship-
ments. Managing the supply chain requires the integration of some parts of the
supply chain that were previously regarded as separate.
Integrated logistics includes the planning, implementation, and control of the
flow and storage of raw materials, in-process inventory, finished goods, services,
related information, and payments among suppliers and consumers from the
production of raw materials to the final recycling or disposal of finished goods.
The logistics value chain has three major elements:
· the supply chain (the physical components, including manufacturing
plants, warehouses, vehicles, and transportation infrastructure)
· logistics business practices (practices and processes associated with the
flow of goods, information, and payments through supply chains)
information and decision technologies (computer-related technologies
used to design, plan, and operate supply chains, including the monitoring
of the status of materials, parts, and finished products in the supply chain
and communications among supply-chain elements)
.
In a well integrated logistics value chain, all supply-chain elements are
optimized with regard to both service and cost. Integrated-logistics technologies
can change a "producer-push" system to a "customer-pull" system, in which
inventory decisions are based on what customers are actually buying. In
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148 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
manufacturing, this change has been driven by intense competition and the
necessity of eliminating waste in the production process in the form of raw
materials, work in process, and inventories of finished goods. In retailing, simi-
lar pressures to reduce costs, coupled with the growing purchasing power of
large retail chains, have led to new ways of doing business. Today, large retail
chains choose suppliers based on how well they can match product flow to
actual customer demand.
In a survey of major global corporations in 1999, more than 90 percent rated
effective supply-chain management as a critical success factor, up from 25 percent
in the early l990s (Deloitte Consulting, 1999a). This change reflects the continuing
concentration by businesses on core competencies; increased outsourcing of
noncore production, distribution, and other functions; continued emphasis on cost
reduction; and product proliferation in the consumer products, food, electronics,
and other industries. Integrated-logistics services enable companies to manage the
supply chain to meet their cost and flexibility goals.
In the past 15 years, integrated logistics has evolved into a new discipline.
Most competitive manufacturing and service companies have installed informa-
tion systems capable of acquiring large quantities of timely, accurate data regard-
ing major business functions throughout their internal and external supply chains.
Advanced planning and optimization (APO) software can respond to the needs of
a range of manufacturing systems (Thomas, 1998~. Enterprise resource planning
(ERP) software, which automates transactions and connects vital business sys-
tems (e.g., manufacturing, human resources, financial, and other information/
data systems), is also widely used. Industries are attempting to develop optimiza-
tion and decision-making capabilities that can translate the information generated
by these systems into higher productivity and profits. The fruits of academic
research have already had a large impact in this area, and they are expected to
have a significant impact on the development and application of new decision
technologies in support of integrated logistics.
Technology Drivers
Technological, organizational, and contextual changes have significantly in-
fluenced performance in integrated-logistics services in the past 10 to 15 years.
Significant technological innovations have been focused on applications of infor-
mation technology:
hardware that automatically captures data, satellite tracking systems, and
navigation systems
information systems, such as manufacturing resource planning and ERP
software, electronic data interchange between firms in the value chain,
and database management software
decision technology
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 149
Other innovations include improved transportation, container, and warehouse
equipment and improved human-machine interfaces. Contextual changes, which
have been both drivers and enablers of change, include: deregulation; the global-
ization of markets; the emergence of integrated supply chains, just-in-time deliv-
ery, and reductions in lot sizes in manufacturing; satellite communication sys-
tems; electronic commerce; increased competition; and other general
technological advances. The technological foundations of integrated logistics rest
primarily on operations research, automated data-capture technologies, and com-
munications/networking technologies. Software providers and third-party logis-
tics providers have been the main drivers of advanced technology development,
diffusion, and use in integrated logistics.
Software Providers
Software companies have performed most logistics-related research and de-
velopment (R&D) (mostly development) in the past 10 years. In manufacturing
and logistics, companies such as SAP, PeopleSoft, and Baan have developed a
suite of ERP modules for planning production, taking orders, and delivering
products. The modules address the following functions:
· production planning (performs capacity planning and creates a daily pro-
duction schedule for a company's manufacturing plants)
· materials management (controls purchasing of the raw materials needed
to build products and manages inventory stocks)
· order entry and processing (automates the data entry process of customer
orders and keeps track of the status of orders)
· warehouse management (maintains records of warehoused goods and pro-
cesses the movement of products through warehouses)
· transportation management (arranges, schedules, and monitors the
delivery of products to customers via trucks, trains, and other modes
of transportation)
· project management (monitors costs and work schedules on a project-by-
project basis)
After nearly a decade of rapid growth and continuous expansion and inno-
vation in product offerings, the ERP market has begun to weaken. The cost and
complexity of ERP have created opportunities for other vendors to emerge. By
focusing on narrower functionality than ERP and solutions customized by in-
dustry, firms such as i2 Technologies and Siebel Systems have rapidly in-
creased their presence in supply-chain and customer management systems (also
known as APO solutions systems). For instance, total revenue for Siebel Sys-
tems grew from $391.5 million in 1998 to more than $2 billion in 2001 (Siebel
Systems, 2002~.
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150 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
The emergence of the Internet as a business communication tool has at-
tracted the interest of leading manufacturing, retail, consumer products, and other
firms. Despite the benefits of ERP in generating operational improvements, com-
panies continue to feel that their procurement systems face serious challenges and
are looking for improvements through business-to-business electronic commerce.
In a 1998 survey by Deloitte Consulting, companies reported that 80 percent of
their strategic objectives for electronic commerce centered on supply chain and
procurement processes. Early on, Ariba and CommerceOne were leaders in elec-
tronic procurement, but the large ERP vendors have invested heavily in adding
electronic commerce functionality that can be integrated with ERP systems. A1-
though it is still too early to determine which approach or which vendors will
succeed, it is clear that large, global firms will invest heavily in online procure-
ment systems (Deloitte Consulting, l999b).
Third-Party Logistics Providers
The number of third-party logistics providers has increased significantly in
the past decade. Third-party providers are companies hired to perform logistics
tasks that were previously performed in house. There are several reasons compa-
nies decide to outsource planning-intensive functions:
· the explosion of new services in the deregulated transportation pro-
vider network
· opportunities provided by new information systems with increasingly so-
phisticated procedures and automation systems
· the availability of more alternatives
· the volatility of demand
· the rationalization of assets to minimize required investment and maxi
mize return
· the focus on core competencies
.
Most frequently cited benefits of outsourcing logistics services include
(Logistics Best Practices Group, 1997~:
· lower costs
· the ability to focus on core businesses
· greater flexibility
· improved expertise/marketing knowledge
· improved customer service
The third-party provider industry has grown significantly in size and scope
in the past decade. Revenues grew from $10 billion in 1992 to $56.4 billion in
2000 and were projected to grow 15 percent annually through 2003 (Delaney and
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 151
Wilson, 2001~. A survey in 1991 of the use of third-party provider services by
manufacturers showed that 31 percent of respondents used them; by 1996,
58 percent used them, including about half of the Fortune 500 companies (Logis-
tics Best Practices Group, 1997~. Another survey of corporate logistics managers
revealed that the outsourcing of the total supply chain to a third-party provider
cut logistics costs by more than 20 percent in the first year (Masters and La
Londe, 1998~. The most frequently used services are warehouse management,
logistics information services, shipment consolidation, rate negotiation, fleet
management/operations, carrier selection, and product returns (Lieb and Randall,
1996~. Information technology, sensor technologies, and communication tech-
nologies are essential to all of them.
The hardware and communications technologies that capture the data needed
to implement sophisticated ERP and APO software are still relatively new re-
sources among integrated-logistics providers. Despite rapid growth in the indus-
try, a significant learning process is under way as industry leaders learn how to
use these tools for competitive advantage, and laggards recognize the inevitabil-
ity of more technology-intensive business. Among industry leaders, the focus is
on the acquisition of information and the effective use of data. Bar coding pro-
vides specific identifiers for items being shipped; wireless communications and,
increasingly, global positioning systems provide real-time data on vehicle loca-
tions. Effective management of these data provides timely information on the
location and progress of shipments, which has greatly improved customer ser-
vice. Perhaps more important, the data can greatly improve efficiency by en-
abling shippers to match vehicles with excess capacity to nearby shipments
headed in the same direction. In the trucking industry, advances in route-planning
software have enabled companies to maximize load levels and meet customer
expectations (Nagarajan et al., 1999~.
The Internet is providing a medium for accelerating and increasing the extent
of these changes. In business-to-business electronic commerce, the Internet could
lead to even tighter integration of supply chains, and all of the logistics software
companies are making their products Internet enabled. As the volume of elec-
tronic commerce increases, there is general agreement in the industry that logis-
tics could mean the difference between success and failure. Some of the leading
users of integrated logistics (e.g., Cisco Systems and Dell Computer) use the
Internet to share information on production schedules, sales, customer orders,
stocks, and other critical production data with their suppliers. For instance, as
soon as a customer places an order on Dell's web site identifying the specific
features being purchased, the order is placed on Dell's production schedule where
suppliers can see it and produce the necessary parts. Integrated logistics ensure
that the parts arrive at the production line and that inventory for both Dell and its
suppliers is at a minimum. The savings have been so large that manufacturers in
other industries, from consumer products to automobiles, are exploring ways to
apply the Dell model to their supply-chain management.
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152 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
As Dell has shown, logistics has become a key determinant of success in
business-to-consumer electronic commerce. Even if Internet-based retail has little
effect on the volume of goods shipped, it will vastly multiply destinations (e.g.,
individual residences) and raise customer expectations. The result is much more
complex logistical systems and an urgency to use technology to manage this
complexity profitably. The full implications of the Internet for supply-chain man-
agement and the business-to-customer interface are just emerging. Information
shared among suppliers is replacing physical inventories as the need for produc-
tion buffers diminishes. However, different industries will embrace this change at
different rates based on a number of factors, such as the number of suppliers and
historic relationships in the production chain (Cairncross, 2000~.
INNOVATION SYSTEM
Except for software companies and some airlines, very few logistics compa-
nies conduct R&D. A few of the leading integrated-logistics service providers
conduct a limited amount of internal research and sponsor research at universi-
ties. These firms include Schneider National (trucking), United Parcel Service
and Federal Express (delivery services), CSX and Union Pacific (railroads), and
Sabre/AMR (until 2000) and several major airlines, such as United and USAir
(air transport). A few major industrial firms (e.g., Ford, Raytheon, Lucent Tech-
nologies, and Procter & Gamble) sponsor research at universities. General Mo-
tors, through its Enterprise Laboratory, also supports logistics research. As lead-
ers in their fields, these and other firms play a critical role in the diffusion of
advanced logistics technologies.
Most innovations in integrated logistics have come from academic research in
transportation/logistics research centers affiliated with university engineering and
business schools and from applied research and product development by software
companies. Relevant research has also been conducted at national laboratories and
transportation centers associated with state departments of transportation.
The academic disciplines involved in research on integrated logistics include
applied mathematics, computer science and engineering, industrial engineering,
operations research, software engineering, materials science, social and behav-
ioral sciences (human factors), and business and management sciences. Aca-
demic research on large-scale optimization models, decomposition methods, in-
teger programming, and network optimization has been extremely valuable to the
integrated-logistics industry. Academic research on the phenomenon of elec-
tronic commerce, in terms of business models and pricing models, has been
crucial to the growth and success of electronic commerce. Economics research on
the structure of the industry and its economies of scale were crucial to the debates
about deregulation. Business schools involved in logistics research and training
tend to focus on the "softer" side of logistics (e.g., management and organization)
in contrast to research on software, which is associated with engineering schools.
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 153
Transportation research institutes with federal, state, and industry support
have been established at some universities to serve as intermediaries between
academia and industry and to translate research results to industry. These insti-
tutes function primarily as conduits between the academic community and trans-
portation practitioners, adapting technology and research results to meet practi-
tioners' needs and giving them a voice in setting research agendas. Most
transportation research centers focus almost exclusively on the movement of
people; only a few (e.g., Logistics Institute at the Georgia Institute of Technol-
ogy, the Center for Transportation Studies at the Massachusetts Institute of Tech-
nology [MIT], Stanford University's Global Supply Chain Management Forum,
and Princeton University's Computational and Stochastic Transportation Logis-
tics Engineering [CASTLE] Laboratory) are doing a significant volume of work
related to moving freight (see Box 5-1~.
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154 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
A unique academic transportation research center is the Trucking Industry
Program (TIP), first established in 1995 at the University of Michigan by a major
grant from the Alfred P. Sloan Foundation; the center was relocated to the Geor-
gia Institute of Technology in 2002.i TIP contributes to the understanding of the
trucking industry through a multidisciplinary approach involving faculty and
students from several U.S. universities, including Georgia Tech, the University
of Michigan, Michigan State University, Wayne State University, and Duke Uni-
versity. TIP is the only academic program in the United States engaged in com-
prehensive research on issues associated with labor, the firm, and operations and
technology in the trucking industry. TIP is widely known for conducting the most
comprehensive survey ever undertaken of truckers at truck stops across the United
States. The driver survey, which was conducted between August 1997 and Janu-
ary 1999, has substantially improved our understanding of drivers' work hours
and is often cited for presenting the first accurate portrait of truck drivers, their
quality of life, and their views of the industry.
Many academic centers require that member companies fund relevant re-
search, provide access to real-world data, and provide sites for implementation.
In some cases, access to research results is restricted to member companies,
which tend to be the leaders among integrated-logistics service providers and
users. At Georgia Tech, member firms pay $50,000 annually to participate, and
individual companies are actively involved in research with academic faculty and
students. Student/faculty teams work on problems defined by one or more com-
panies, and research results are disseminated actively among members. At
Stanford, member firms pay $25,000 to support academic research as part of an
industrial consortium. Members benefit from networking and from student/
faculty teams working on problems of interest to all participants. At MIT, firms
pay $20,000 to share research findings and network but are not directly involved
in research.
In addition to research, university transportation research centers also pro-
vide executive courses, seminars, and symposia to inform industry of state-of-
the-art academic research and new logistics technologies and to inform faculty
members of the real problems in industries. For example, affiliate companies of
the MIT Center for Transportation Studies come to MIT seven or eight times a
year to review the status of academic research.
CONTRIBUTIONS AND IMPACT OF ACADEMIC RESEARCH
Basic research, some of it done in the 1950s with no logistics applications in
mind, has had the greatest impact on integrated logistics. Linear programming
and integer programming have both made major contributions to methodology
(see Box 5-2~. Major technological contributions emerged from research on com-
puter science/artificial intelligence, specifically constraint-directed search and
its relatives.2
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 155
Applied research has also been important to integrated logistics, especially in
the areas of large-scale optimization modeling, decomposition methods, network
optimization, and other areas of operations research. For example, research at
MIT on models for shippers in the logistics industry includes transportation/
inventory trade-offs and motor-carrier bidding optimization. Software for rout-
ing, production scheduling, and distribution management are examples of high-
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162 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
Academic research might have a larger impact in the area of linkages be-
tween manufacturing and transportation, especially as companies continue to try
to reduce inventories, transport costs, and time through integrated supply-chain
management. Another fruitful area for research would be the development and
use of optimization procedures for the macrolevel coordination of the supply
chain, such as the allocation and scheduling of activities among plants, ware-
houses, and transportation channels. For example, a production schedule that
would mean low manufacturing costs might increase transportation costs. Be-
cause these costs are incurred (and measured) by different departments, manufac-
turers may not take transport costs into consideration in their planning. As long as
companies had buffers (time and/or inventory) to decouple these processes, this
was not much of a problem, but it will certainly become a major problem soon.
Forecasting transportation demand is becoming increasingly important, and ca-
pacity planning by carriers will have to be even more rigorous to account for
uncertainties/variabilities in demand.
University research could play a larger role in other areas, such as the inte-
gration of planning and operations, the development of information technology to
support order placement, the development of information technology to support
the coordination and scheduling of the movement of goods, and consumer re-
search. For instance, with the availability of real-time information (e.g., current
inventory levels at retail stores; current traffic information), models of sequential
decision making under uncertainty may become a basis for logistics tools in the
future. Research in these areas would be "engineering research" (i.e., research
focused on bringing technologies to bear on industry problems for which few
principles or laws exist). Transportation and logistics security has become a
critical issue that will also pose important research questions in the future: for
example, how to improve the security of systems while continuing to improve, or
at least maintain, their efficiency.
FINDINGS
Finding 5-1. The contributions of academic research to integrated logistics have
been significant in areas of basic research as well as in the development and
application of specific software technologies. However, academic research on
logistics and technologies has had a moderate impact on the transportation, distri-
bution, and logistics industry overall.
Except for the involvement of member companies in academic logistics-
research institutes, no institutionalized methods of technology transfer from uni-
versities to the TDL industry have been established. Most high-impact academic
research in operations and decision-support sciences can be attributed to faculty
members who either translated their research findings into software commercial-
ized through a start-up company or who were closely involved with a specific
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 163
company in the industry. For the latter route to be effective, the host company
must be sophisticated enough to be receptive to innovative research, and the
researcher must be familiar with the specific needs of the company. Industries
that have been most influenced by academic research are airlines, manufacturers
that operate private truck fleets, less-than-truckload and truckload motor carriers,
and software companies.
Without a strong tie to industry, academic research tends to be disconnected
to the needs of industry. The academic imperative that researchers publish their
work often creates barriers to their addressing real industrial needs using real
industrial data. Research problems that could lead to publishable results may be
far too complex for companies to benefit from the results. For these reasons, the
commercialization of results through start-up companies may continue to be the
most effective pathway for academic research to affect industry performance.
Finding 5-2. Federal funding agencies have not recognized logistics as a sepa-
rate intellectual discipline and thus have not funded long-range, potentially high-
impact academic research in the field.
The DOT, primarily through the University Transportation Centers Program,
funds some research relevant to logistics. NSF provides some funds for programs
that bring industry and academia together in the logistics area (e.g., CELDi, the
multiuniversity industry-university cooperative research center formed in 2001~.
In addition, NSF has launched a modest initiative, Exploratory Research on Engi-
neering in the Transport Industries, that specifically addresses logistics and
supply-chain management. Although some NSF-funded research has benefited
airlines that contributed matching funds, NSF's funding for research in logistics
has been minimal. In the past DOD (particularly the Office of Naval Research
and the Air Force Office of Scientific Research) funded logistics as a discipline,
but the funds are now focused more on mathematics research. DARPA has an
extensive applied research program in logistics, but funding has been directed
mostly toward consulting companies rather than universities.
Finding 5-3. The two most influential factors on the industry are (1) the explo-
sive growth of information technology and complementary disciplines and
(2) deregulation of the freight industries.
Finding 5-4. Most companies are still in the process of adopting and implement-
ing information systems and acquiring data from the new systems. The next wave
of innovation will be to apply the data to optimization models to support
decision-making capabilities.
Decision-support software can be divided into two categories: (1) the
automation of transactions to increase productivity and improve quality,
and, in the process, create and collect data; and (2) the optimization of
management decisions based on these data. Most companies have been in the
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164 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
information-acquisition stage for some time and have accumulated large
quantities of accurate, real-time data. Optimization and decision-making sup-
port tools could be used to translate these data into information that could
lead to higher profits and competitive advantage.
Finding 5-5. Except for airlines, few companies in the TDL industry conduct
their own research, and those that do are primarily interested in development
rather than research.
Airlines have not only invested in their own research, but have also demon-
strated their support for academic research by funding research projects and
participating in logistics-research institutes. Most other TDL firms have not
yet realized the value of R&D for increasing efficiency and establishing a com-
petitive advantage. These companies have a long history of adopting low-
technology, manual-intensive business models. Even the competitive demands
of the industry have not yet created a significant demand for research. Most
research, therefore, has influenced them through software developments, either
by existing software firms or new start-up companies.
Finding 5-6. Providers of logistics software are undergoing rapid consolidation.
Consolidation in the logistics software industry has narrowed the range of
industry-research interfaces resulting in fewer spin-off companies. Consolida-
tions may eventually create economic units large enough to support more
basic research.
Finding 5-7. The lack of industry demand for research and research-based
innovations has made it difficult for academic researchers to identify useful,
high-priority problems.
The absence of organized interactions between academia and industry re-
flects the general lack of an organized innovation system in the logistics industry.
Most academic researchers have little incentive to work with industry or to un-
derstand industry issues. Because NSF and other funding agencies do not recog-
nize logistics as a discipline, academics are reluctant to go into the field. The lack
of interest on the part of industry, particularly the lack of corporate R&D depart-
ments to provide an interface with researchers, reinforces this reluctance.
Finding 5-8. Research important to industry requires researchers who under-
stand the industry and the subtleties of the problems industry faces.
The experience of company-supported logistics institutes has demonstrated
the importance of having a critical mass of academic researchers who thoroughly
understand both the problems industry faces and the academic methodologies
needed to solve them. Although these research subjects meet rigorous academic
criteria and address the real needs of industry, much more work will have to be
done to encourage industry interest in academic research.
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 165
Finding 5-9. Transportation-research institutes have the potential to improve
industry-university interaction significantly. MIT's Center for Transportation
Research, Georgia Tech's Logistics Institute, Stanford's Global Supply Chain
Management Forum, and Princeton's CASTLE Laboratory have shown that they
can improve the transfer of information between academia and industry.
Historically, these four centers have accounted for most industry-related
logistics research in academia; all four rely on industry participation and funding.
With NSF support, CELDi continues this model, requiring industry participation
but in a multiuniversity context. The effectiveness of these institutes is a function
of their critical mass of academic researchers who can interact effectively with
industry. The continuity of industry participation in research, outreach, network-
ing, and continuing education has initiated a two-way learning process.
RECOMMENDATIONS
The flow of people between academic research and industry must be greatly
increased. The panel recommends that the following steps be taken to further
this end.
Recommendation 5-1. Academia should develop better curricula and programs
in logistics to attract student, faculty, and industry interest. This will require
changes in the incentive and reward systems to encourage qualified researchers to
work in the field.
Recommendation 5-2. Industry should establish sabbaticals in industry, full-
time or part-time teaching by industry practitioners in universities, and other
programs that would promote university-industry interactions.
NOTES
1TIP moved in 2002 when the director, Dr. Chelsea C. White, joined the faculty of the School of
Industrial and Systems Engineering (ISyE) at the Georgia Institute of Technology.
2Constraint-directed search is one of a class of constraint-satisfaction problems in artificial intel-
ligence in which knowledge is expressed declaratively as a collection of explicit, categorical con-
straints over a set of possibilities.
3Companies profiled include LogiCorp, Inc., PTCG, Inc., CAPS Logistics, CPLEX
Optimization, Inc., AD OPT Technologies, Inc., Transport Dynamics, Inc., STS, and Cambridge
Systematics, Inc.
REFERENCES
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human capital on the work and work lives of truck drivers. Industrial and Labor Relations
Review 54(2A): 502-524.
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166 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
Cairncross, F. 2000. Inside the machine: a survey of e-management. The Economist, Supplement
357(8196): 5-40.
Cass Information Systems. 1999. Wall Street's View of Logistics. Annual Session of the Council of
Logistics Management, Toronto, Ontario, October 18, 1999.
Delaney, R., and R. Wilson. 2001. Managing Logistics in a Perfect Storm. 12th Annual State of
Logistics Report. Washington, D.C.: Cass Information Systems.
Deloitte Consulting. 1999a. Energizing the Supply Chain: Trends and Issues in Supply Chain Man-
agement. New York: Deloitte Consulting.
Deloitte Consulting. l999b. Leveraging the e-Business Marketplace. New York: Deloitte Con-
sulting.
Lieb, R.C., and H. Randall. 1996. A Comparison of the Use of Third-Party Logistics Services by
Large American Manufacturers, 1991, 1994, 1995, and 1996. Lexington, Mass.: Mercer Man-
agement Consulting.
Logistics Best Practices Group. 1997. Survey on Logistics Outsourcing Practices. College Park, Md.:
University of Maryland Press.
Masters, J., and B. La Londe. 1998. The 1997 Ohio State University Survey of Career Patterns in
Logistics. Columbus, Ohio: Ohio State University Press.
Nagarajan, A., J.L. Bander, and C.C. White III. 1999. Trucking. Pp. 123-153 in U.S. Industry in
2000: Studies in Competitive Performance. Washington, D.C.: National Academy Press.
Siebel Systems, Inc. 2002. Annual Report 2002. Available online at: http://www.siebel.com/
common/includes/pdif rame.shtm.?pdfurl=/downloads/about/pdf/siebel_2002_annualrpt.pdf.
Thomas, J. 1998. The Quest Continues. Logistics Management and Distribution Report 37(8): 39-41.
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167
ADDENDUM
Questionnaire
The following questionnaire was sent to selected individuals, primarily uni-
versity-based researchers, with special knowledge of the transportation, distribu-
tion, and logistics industry. Included among the questionnaire respondents were a
senior executive at the Sabre Group and professors with expertise in operations
research, applied mathematics, industrial engineering, transportation research,
and integrated logistics from Georgia Institute of Technology, Massachusetts
Institute of Technology, Northwestern University, Princeton University, Univer-
sity of Maryland, and Universite de Montreal.
IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL
PERFORMANCE
1. Briefly describe research carried out in your university that has had an
impact on integrated chain logistics within the transportation, distribution, and
logistics services (TDL) industry.) If possible, please provide information about
the nature of specific research contributions; the level of faculty, student, and
industrial researcher involvement; the research time frame; sources and level of
funding; how research results were transferred (specific steps) to the industry,
and whether the research had implications for companies and industries beyond
the specific company or industry involved.
2. Please describe briefly any other academic research they you believe has
had a notable impact on the TDLS industry. (See suggested issues/items in subtext
to question #1.)
3. Overall, would you describe the impact of academic research on industrial
performance in the TDLS industry as (circle one):
1. very large
2. large
3. medium
4. small
5. very small/non-existent
IThe NAE panel defines the TDLS industry as encompassing all businesses involved in the
transportation and storage of goods and the movement of people. Its constituent parts include: carri-
ers, third party logistics firms, management consulting firms, terminal and distribution firms, ware-
housing companies, shipping companies, software providers, and major customers/retailers. The
focus of the NAE panel study, however, is on the contributions of academic research to integrated
chain logistics and associated activities, technologies, and methodologies that cut across the TDLS
industry's many constituent parts.
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168 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
4. Briefly describe significant emerging trends or developments in
the TDLS industry in which university research could or should play a larger role.
5. What are the most important actions universities could take
to enhance the contributions of academic research to performance in
the industry?
6. What are the most important actions companies could take
to enhance the contributions of academic research to performance in
the industry?
7. What are the most important actions government could take
to enhance the contributions of academic research to performance in
the industry?
8. What is your estimate of total annual research dollars spent at your
institution on academic research related to the TDLS industry? What shares of
the total would you estimate are funded by government, industry, or
other sources?
9. Other comments?
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 169
Industrial Roundiable Agendas and Participant Lists
INFORMATION TECHNOLOGY IN THE LOGISTICS,
TRANSPORTATION, AND DISTRIBUTION INDUSTRY
A ROUNDTABLE DISCUSSION
October 12, 1998
Radisson Hotel, Maingate Anaheim
Anaheim, California
Roundtable Agenda
6:00 Welcome
Chris Lofgren, Schneider National, Inc.
Introduction
Don Ratli~ Georgia Institute of Technology
6:10 Roundtable Participants
Self-introduction; major technology needs and trends
in the workplace
7:10 Group Discussion
Decision Support Systems: current andfuture trends and needs
8:00 Session Wrap-Up and Adjourn
Chris Lofgren
Participants
Industry Experts
Chair: Chris Lofgren, Chief Technical Officer, Schneider National, Inc.
Christopher Caplice, Senior Consultant, The Sabre Group
Virginia Carmon, Senior Manager, KPMG Peat Marwick LLP
Bernard Hale, Senior Vice President Customer Support, DSC Logistics
Thomas Sanderson, President, Sabre Decision Technologies
Jay Mabe, Associate Partner, Andersen Consulting
John Coyle, Kimberly Clark Corporation
NAE Panel Members:
H. Donald Ratliff, Regents Professor and UPS Professor of Logistics and
Director, Logistics Institute, Georgia Institute of Technology
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170 THE IMPACT OF ACADEMIC RESEARCH ON INDUSTRIAL PERFORMANCE
Cynthia Barnhart, Associate Professor, Civil and Environmental Engineering
Department, Massachusetts Institute of Technology
Robert E. Bixby, Professor, Department of Computational and Applied
Mathematics, Rice University
NAE Staff
Diane Alberts, NAE Fellow, Program Office
Proctor Reid, Associate Director, Program Office
Nathan Kahl, Project Assistant, Program Office
CHALLENGES AND TRENDS IN THE LOGISTICS,
TRANSPORTATION AND DISTRIBUTION INDUSTRY
A ROUNDTABLE DISCUSSION
October 13, 1998
Radisson Hotel, Maingate Anaheim
Anaheim, California
Roundtable Agenda
Welcome and Opening Remarks
Professor H. Don Ratliff (Georgia Institute of Technology) and
Professor Cynthia Barnhart (Massachusetts Institute of Technology)
Self-introduction of Roundtable Participants:
Describe your job and three major challenges that you currently face.
Specific questions to focus your thoughts:
What are your thoughts on the changing nature of the logistics business?
2. What are the current and future technology needs of your business?
3. Name the most important technological innovation in your business in the
recent past?
4. Do you interact with / turn to colleagues at universities to help meet your
business challenges? If so, how? If not, why not?
5. What is an important emerging trend in the LTD industry?
6. What are your human capital needs? What are challenges?
List of Participants
Industry Experts:
Don Schneider (chair), President, Schneider National, Inc.
Doug Duszynski, Director of Transportation, The Quaker Oats Company
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TRANSPORTATION, DISTRIBUTION, AND LOGISTICS SERVICES INDUSTRY 171
Wayne Power, Director, Global Logistics, Owens Corning
Vince Chiodo, Director of Supply Chain Management, CHEP USA
Hank Dehne, Manager of Logistics Distribution & Planning, General Mills
NAE Panel Members:
H. Donald Ratliff, Regents Professor and UPS Professor of Logistics and
Director, Logistics Institute, Georgia Institute of Technology
Cynthia Barnhart, Associate Professor, Civil and Environmental Engineering
Department, Massachusetts Institute of Technology
Robert E. Bixby, Professor, Department of Computational and Applied
Mathematics, Rice University
NAE Program Office Staff:
Proctor Reid, Associate Director
Diane Alberts, NAE J. Herbert Holloman Fellow
Nathan Kahl, Project Assistant
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Representative terms from entire chapter:
logistics services
