How to Harness the Economic Power of Logistics Clusters

PLaza logistics park
Mutual benefits. The Zaragoza Logistics Center, Zaragoza, Spain, is based in PLAZA, Europe’s largest logistics park, and both organizations benefit from the relationship

This post will be published in the fall 2013 issue of MIT CTL’s online newsletter Supply Chain Frontiers. Subscribe to Frontiers here.

The Zaragoza Logistics Center (ZLC), Zaragoza, Spain, is celebrating its 10th anniversary this week. ZLC is a success story with a number of themes, but two of them resonate beyond the logistics community: economic growth and job creation.

In 2001 the government of Aragón in northern Spain realized that its economy had become overly reliant on a small group of industries, notably auto manufacturing. It developed a strategic plan to capitalize on the region’s historic strengths as an international crossroads for commerce.

The plan was to transform the region into a logistics hub. A central feature was the creation of a logistics cluster, an agglomeration of firms and business functions located in the same region that share expertise and know-how. This exchange of resources can yield significant cost and service benefits for companies in the cluster.

Fast forward to 2013, and the strategy’s success is plainly visible. The plan led to the creation of Europe’s largest logistics park, PLAZA, located just outside the city of Zaragoza. Hundreds of companies including global enterprises such as Inditex now reside in the logistics park. PLAZA employs an estimated 12,000 people.

The rise of PLAZA offers a number of important lessons for leveraging the power of logistics clusters to generate economic activity.

“The academic element is crucially important,” says Professor Yossi Sheffi, Director of MIT CTL, and author of the book on the growth of logistics clusters, Logistics Clusters: Delivering Value and Driving Growth (MIT Press, October 2012).

As well as establishing a pool of educated professionals that the cluster can draw on, an academic partner also provides a platform for research and innovation.

In the case of PLAZA, the Aragón government partnered with MIT CTL to execute its economic strategy. They created education and research programs through the MIT Zaragoza International Logistics program, which is housed at the ZLC.

These offerings include various professional courses, a PhD program, and the flagship MIT Zaragoza Master in Logistics & Supply Chain Management (ZLOG) full-time program. There is also the part-time Master de Logistica (MdL) master’s program taught in Spanish that has become an important source of talent for the local cluster. MdL was recently redesigned to meet new regional industry demands.

The symbiotic link between ZLC, its educational and research programs, and PLAZA, is strengthened by the fact that ZLC is physically located within the park.

Also important to the growth of PLAZA is the multiplicity of industries that the complex has attracted. “Again, this is typical of a successful cluster. It means that the cluster’s growth is not reliant on any one industry,” points out Sheffi.

The challenge now is how to take PLAZA to the next level of growth.

“Logistics clusters are self-reinforcing. The benefits they offer such as more frequent and less costly transportation services and improved customer service attract more companies, which increases the benefits and makes the entity even more attractive,” Sheffi explains.

PLAZA is using this positive feedback loop to increase its competitiveness.

“We still have a lot of potential as a cluster, and we have the infrastructure and the space needed to host many more companies that create new jobs,” says Jose Luis Carreras, Director of the Transportation Division of local logistics services provider Grupo Logistico Carreras.

In addition, “there is a strong push in Europe to build logistics parks for sustainability reasons,” notes Sheffi. Logistics clusters are uniquely positioned to become centers of excellence for environmentally sustainable supply chains, since they are focal points for freight traffic.

In a broader context the clusters are centers of supply chain innovation, and this is an area of expertise that the government of Aragón wants to leverage going forward.

For example, The Cluster Association of Innovative Logistics of Aragón (ALIA) is an initiative created by ZLC, the Aragón Institute of Technology, Aragón’s Council of Chambers of Commerce, and the Foreign Investment Office of the Government of Aragón. The main purpose of ALIA is to build on the success of PLAZA and “to reinforce the cluster by identifying and developing opportunities for logistics research, alliances, and promotion of the region,” explains Carreras, who is president of ALIA.

The organization was involved in a project to lower the cost of rail transportation between Aragón, Paris and Brussels, by improving rail load factors. Another initiative helped two companies to develop and implement radio frequency identification technology.

ALIA’s mission is in line with the European Union’s smart specialization strategy (called RIS3), which encourages regions to foster certain types of expertise to promote economic growth.

Sheffi believes that logistics clusters will become even more important to world trade over the next decade. This trend bodes well for the future of PLAZA.

“The logistics park is well placed to capitalize on these demands, particularly as Europe recovers from the economic downturn that has hampered the region’s growth over recent years,” says Sheffi.

 

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