11 Feb A logical approach to logistics
Benny Mantin, Director, Luxembourg Center for Logistics and Supply Chain Management (LCL), is preparing the way for the nation to be an advanced hub of innovative, data-driven logistics processing.
LCL was founded by the government of Luxembourg in 2015 in partnership with the Massachusetts Institute of Technology (MIT). To begin the interview, can you briefly introduce LCL, its mission, and its scope of operations? What was the thinking behind establishing the center?
LCL was established following a three-way agreement between the government of Luxembourg, the University of Luxembourg and MIT. They set up a 10-year agreement to establish the center. It was signed back in December 2015, and, about a year later, I was hired and joined the university to set up the center. The agreement basically followed the government strategy to diversify the economy. In that, they’ve identified a number of key sectors of the economy where they want to invest more efforts to diversify. Logistics was one of those key domains.
The center was to complement other investments they carried out in the logistics sector. By setting up the center, basically they emphasized the importance of research, education and innovation in this context. When I joined the university and took over the leadership, I made sure that we developed around three core pillars: one is the research, second is education and the third is outreach. And you really need three pillars to be in unison. Research is to make sure we are working on the cutting edge, that we publish in top journals, and make ourselves visible. We want to develop a reputation in the academic world, so we have recognition as a group of researchers who know what they’re doing and are innovative.
Education: that’s where the collaboration with MIT comes into full force. We have a one-year master program that follows the template of MIT. Basically, we recruit students from all over the place—some are European but the majority comes from outside Europe. They come to Luxembourg for one year, having had some years of experience before joining the program. They have normally analytical backgrounds in the center, and they tend to come from economics, engineering or management. They have spent a couple of years in the industry, so they know what logistics is about; they know how supply chain operate, they understand operations, they have a vision for their companies, and they are looking for the next steps. Before taking those next steps, they need to take the additional layer of education, so they come to Luxembourg, where we take them through our extensive program. At the end, they graduate with a master’s degree in logistics and supply chain management. Most of the students, thus far, take positions in Luxembourg, though some go further away, while others go back home because there are different things they have aspirations for.
The third part is the outreach. What I mean by outreach is all the interaction we have with industries. That’s a critical component in making sure that our hand stays on the pulse. To make sure we understand what practitioners are looking for, we have concrete interactions with them. This includes a seminar series with practitioners. They come and talk to the students on a regular basis. They present the students with challenging problems that companies are facing and explain how they solve those problems. This serves a core part of the master program.
It’s a master program with applied thesis. A big part of the thesis is allocated for working on a real research problem that companies—the partners—bring to the students. We have been working with a good number of companies, not just from Luxembourg, but from elsewhere too. All companies are well recognized in the domains. I can count companies like Vodafone, Ferrero, Arcelor Mittal, the airport, Cargolux and the hospital; Amazon is joining us this year. Plus, many more which have been working with us on projects with students. They have been happy with the implementation, and they always come back for more projects with the students.
That really demonstrates how we work with industry to solve relevant problems. Also, later on, those problems feed the research that we carry out at a higher level. We use those projects to make sure that students can complete their master’s thesis. We have the companies engaged. In doing this, we complete the vicious yet victorious cycle that composes the three aforementioned pillars.
Apart from that, we also have a series of different activities with practitioners. We have an annual explore conference, where we bring together researchers, practitioners and policymakers. We have a series of roundtables. It’s a very lively and dynamic center. At the moment, awe have five professors, a number of postdocs and a good number of PhD. students working on both theoretical and practical problems. Some are funded by industry. Some of the problems are quite interesting. One is working on an issue with Arcelor Mittal in the context of procurement. Another one is working in the context of the shipping industry to figure out how to green the shipping industry. A postdoc will join us soon to work on inventory problems in the context of the BASF Group, one of the largest petrochemical companies. Yet another project that we are starting is with medical isotopes. Medical isotopes have a unique supply chain, and, given the shortage of isotopes nowadays, it’s really important to figure out the flows and optimize them to make sure that we use the resources in the best way.
LCL was founded in part to support Luxembourg’s mission of becoming a European logistics hub. What would you say are the country’s main competitive advantages as a center for logistics in Europe?
In terms of competitive edge, it’s the location. It’s placed at the core of the continent. As such, it’s very easy to access; it’s very easy to bring stuff into the country and redistribute it to the rest of the continent. We now see many companies treating Luxembourg as their European hub. Once ones product is here, it’s relatively simple to redistribute to other nearby countries.
Another advantage that we have here is our multilingualism. In the logistics sector, although English is still the dominant language, when there are people on the ground, you do need to speak a number of languages. Once you cross the border and go into Germany or into France, it’s quite useful if you speak the neighboring languages. Having this access to multiplicity of languages plays a role.
Third, is how the country tries to bring together multi-modality, enabling a fast transition from truck to rail, from airport to rail or truck and so forth. In all these aspects, bringing them a little bit closer together plays an advantage. We have to realize we’re doing well in terms of logistics. We’re not one of the giants, so we are not expecting to be a country like Germany or the Netherlands where logistics plays a core part of their economies, but it still has a serious role here.
Another feature is that the government or the country emphasizes the role of digitalization, making sure that all companies take the extra step to automate, to digitize and have their operations brought up to the next level.
COVID-19 came with many challenges, particularly for the logistics industry. There were opportunities as well. With people increasingly staying at home and ordering goods online, how did the logistics sector navigate the complications that came along with COVID-19? What most surprised you about this new paradigm?
In Luxembourg, it goes back to the advantage of being in a small country. In a small country like ours, people know each other. We know that some parts of the economy were affected negatively, and there were a number of people without proper employment. Here you can more easily move things and people around to make it work. For instance, when they realized we needed more people at the airport to speed up cargo operations, they brought people from elsewhere who were underemployed and made sure that they had the support where it was needed. Again, this is far more feasible in a small country where the networks are in place.
In terms of logistics and how we operated during the pandemic, that’s a very big question and I’m not sure it can be answered quickly. Generally speaking, despite claims to the opposite, I think supply chains were actually functioning quite well. There were some occasional instances of shortages and empty shelves, but, generally speaking, people were not running out of supplies. Flows were still coming in. People around the globe in these sectors were working extra hard to make sure that flows were reaching their destinations. But we did have all the challenges of quarantines, restrictions, of different hubs not operating well. There were issues but, if we take the broader perspective, supply chains were functioning.
What we have right now, as the economy starts up again, are shortages of a different kind. We have now global supply chains that are not that short anymore. We have so many different stages, the time it takes for the supply to come from one tier of the chain to the next and beyond, all the way to the end consumer, can be quite lengthy. During the early stage of the pandemic, when demand was badly affected, many facilities started tightening their supply, laying off employees and eliminating all the inventory, just to make sure that they could survive the crisis. Unfortunately, some companies even shut down completely. But now the demand has picked up again, and when you have the demand is sending a shockwave through the system. Everyone is starting to think we need to speed up production. But it takes time to get people on board. You laid them off just a year ago. Maybe they found an alternative job, maybe they need training. You cannot pick up production right away. We also have some capacity missing because of all the facilities that closed. The many facilities that were shut down temporarily cannot just turn on the switch and expect stuff to come out of the production line. It takes a while to pick up the process.
The peak in demand that happened here is now being amplified. Everyone up the stream is struggling to produce, struggling to deliver. Ultimately all the stuff will come, but we will then have oversupply. Once you have oversupply, everyone will say, I don’t need this entire inventory anymore right now. We’ll probably go through this cycle a couple of times before things stabilize. There are two kinds of simple solutions. One is to shorten the supply chain. That’s what people talk about when they bring up reassuring. If you can reassure activities, you can basically reduce the time it takes to deliver between the different tiers. And you can also increase communication between the different tiers. Increased communication means that you will have more transparency between the different tiers of the supply chain. If we can embrace this kind of information sharing—again transparency, sometimes through digital solutions but, more importantly, through trust—you can really transition to the level where you can work smoothly and reduce all these hiccups.
Many countries have worked towards enhancing digitalization in their supply chains, and supply chains are increasingly complex and data-driven. What progress have you seen in the past several years in the Duchy and what remains to be done?
Digitalization is moving really fast. It was only a few years ago that we started the wave of analytics, where we embraced new buzzwords and told companies to use the data. If you remember the big data trend, it is still here but has integrated with our operations. We need to make sure that we have big data: understand what the data is about, understand what data needs to collect, and have people who have the data mindset. By the data mindset, I mean people who understand how data is structured, who know how to convert data to stories that ultimately will be presented to decision makers who can actually make decisions based on it. You can easily drown in the ocean of data. There is so much out there that you need to be quite picky in what it is that you’re using to make decisions.
In that context, we have designed our program to be data driven. Our program prepares students for the challenge. We have recently introduced a data summer camp, so if they are not proficient in data, we have a two-week data program that they can take prior to starting, bringing them up to speed in data skills. Basically, they learn Python, and actually they progress very fast because they need these advanced skills when they are in the program.
To follow up on that, we have recently introduced another stream in our program. The program traditionally was a single stream, so everyone went to the same program, and, in the second term, apart from working on the applied thesis project which I mentioned before, they also take a series of electives we have. We have restructured the program in collaboration with the Chief Procurement Club based here in Luxembourg and the government, to set up a chair and a stream in the program on digital procurement. As the name implies, the focus is on procurement with emphasis of digitalization. They take extensive knowledge of digital and procurement, so they understand the procurement process, negotiations, how do you look for different suppliers, sourcing strategies, and so forth. There is emphasis, too, on the digital aspect.
Moving forward, what would you say is your strategic vision for LCL?
We are concluding our first phase of development, which was essentially the setup of the program. We are now five faculty members, and we have one program. What remains in the longer term is a better integration with the undergraduate program, one that can offer continuity to the students. Right now, our master students, as I mentioned before, are coming from all over the place, mostly from overseas. We have a good number of Indian, Chinese, Korean, American, African and South American students coming to Luxembourg, taking the year of education. We would like to see some home-grown students completing their education in Luxembourg, going to the university here, and continuing immediately into the master’s degree. Clearly this is a different kind of master’s program, but if you take your undergraduate and then move into a two-year master’s degree—as opposed to a one-year master that we have right now—it becomes a different beast. We need to develop the offering carefully.
Another dimension that I would like to see happening in the near future is bringing companies further on board, thus providing greater engagement in larger scale research projects. I gave you a few examples. This is just a starting point, but I think there are opportunities to develop more ambitious projects with industry.
Do you have any final comments for the readers of Newsweek magazine?
I think it’s important to realize that Luxembourg is becoming a procurement hub. That’s why we have the chair in digital procurement. There are a good number of companies with their procurement operations already in Luxembourg, as I mentioned. Vodafone, Amazon, Ferrero, Arcelor Mittal and many others have their global headquarters here. There are also those not headquartered here but who are nonetheless basing their procurement activities in Luxembourg. That’s how we managed to liberate the opportunity to have procurement practitioners here, this next level of education as well as cutting-edge research around procurement.
In terms of my concluding remarks, Luxembourg, offers some great prospects for development, for excellence. There are great opportunities that you can leverage here and, if you come with the right ambitions, you can always succeed here.