Caribbean Maritime Logistics

A Cluster Approach

Presented by

Professor Miguel Carrillo, Ph.D.Executive Director and Professor of Strategy

Arthur Lok Jack Graduate School of BusinessThe University of the West Indies, St. Augustine

m.carrillo@lokjackgsb.edu.tt

www.lokjackgsb.edu.tt

May 18th 2016

What is competitiveness?• Competitiveness is determined by the productivity with which a nation uses its human, capital, and natural

resources.

• What is Competitiveness?• – Productivity depends on the prices that a nation’s products and services command (e.g. uniqueness, quality), not

just efficiency

• – It is not what industries a nation competes in that matters forprosperity, but how it competes in those industries

Developments affecting the Shipping Industry

• Radical Disruptive Innovation: The Container• Integration of Value Chain:

– Port Control– Cargo Vessels Ownership– Insurance– Floating Factories, Warehouses and Distribution Centers

• Emergence of Local Manufacturing Capabilities• Slow down in Economy => Excess Capacity in Transportation• New routes• New Role: Connecting Vs Integrating

Exercise• What services or products you currently offer have the following characteristics:– Original– Unique– Singular – Different– Difficult to imitate– Difficult to substitute– Provides extraordinary value for customers– Generates extraordinary profits for your firm

Maritime

• Trade Facilitator ?– Victims and Beneficiaries of Trade

• Is there a way we can become protagonist in the primary activities of the supply chain?

• THE INTEGRATION CHALLENGE!

Maritime

As providers of Shipping Services:

How are we going to differentiate our value proposition?

How are we going to make it more relevant, impactful, original?

What else can we do that could add tremendous value to mycustomer?

Proposition # 1

• Innovate your Value Proposition

The Science of Growth• Jeffrey Sachs on Convergence and Long Term Growth:– Top most positive impact variables in growth

• Open Markets (consistent)• Growth of economically active population• Institutional Quality• Central Government Budget Balance

– Top most negative impact variables in growth• Share of natural resource exports in GDP• Initial per capital GDP (study point of departure)• Tropical Location• Landlocked Location

Fundamental Change in the Distribution of World Exports

• 1980s‐1990s– North‐North 61%– North‐South 17%– South‐North 16%– South‐South 6%

• 2010‐2012– North‐North 40%– North‐South 20%– South‐North 24%– South‐South 15%

Proposition # 2

• Position the Caribbean in the Pacific 

Proposition #3

• Complement your understanding of international markets and trade with manufacturing awareness.

What are clusters and why is it important?

Source: Porter 2011

What are clusters?

Clusters are “geographic concentrations of interconnectedcompanies, specialized, service providers, and associatedinstitutions in a particular field that are present in a nation orregion” – Professor Michael Porter, Harvard Business School

Source: “The Cluster Initiative Green Book” 2003

From Sector Thinking to Cluster Thinking

Examples of Clusters within these neighboring countries 

• Peru‐ Tourism Cluster• Mexico‐ Automotive Cluster• Chile‐ Mining Cluster• Ecuador‐Apparel Cluster• Colombia‐ Sugar Cane Cluster• Brazil‐Aeronautics Cluster• Bolivia‐Automotive Cluster

Peru’s Tourism Cluster

Sources: HBS student team research (2003) ‐ Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden

Hotels

Attractions andActivitiese.g., theme parks, casinos, sports

Airlines, Cruise Ships

Travel agents Tour operators

Restaurants

PropertyServices

MaintenanceServices

Government agenciese.g. Australian Tourism Commission, Great Barrier Reef Authority

Educational Institutionse.g. James Cook University,Cairns College of TAFE

Industry Groupse.g. Queensland Tourism Industry Council

FoodSuppliers

Public Relations & Market ResearchServices

Local retail, health care, andother services

Souvenirs, Duty Free

Banks,ForeignExchange

Local Transportation

State of Cluster DevelopmentTourism Cluster in Cairns, Australia

Structure of Cluster: Mexico’s Chocolate

Aerospace Vehicles & Defense

FurnitureBuilding Fixtures, Equipment & Services

Fishing & Fishing Products

Hospitality & TourismAgricultural 

Products

Transportation & Logistics

Cluster Linkages and Economic Diversification

Plastics

Oil & Gas

Chemical Products

Biopharma‐ceuticals

Power Generation

Lightning & ElectricalEquipment

Financial Services

Publishing & Printing

Communi‐cationsEquipment

Aerospace Engines

Business Services

DistributionServices

Forest Products

Heavy Construction Services

ConstructionMaterials

Prefabricated Enclosures

Heavy Machinery

Sporting & Recreation Goods

Automotive

Production Technology

Motor Driven Products

Mining & Metal Manufacturing

Apparel

Leather & Related Products

Jewelry & Precious Metals 

Textiles

Footwear

Processed Food

Tobacco

Enter‐tainment

Information Tech.

Medical  Devices 

Analytical InstrumentsEducation & 

Knowledge Creation

Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions.

Only a granular regional analysis and thediscovery of global growth pockets willhelp us to set the right growth direction

Tasks: Design of Logistics Cluster• Most critical economic activity

– Generates demand– Complementary activities

• What most be the main focus? The big bet?? – Tourism? – Agriculture?– Trans Shipment? 

• Logistics clusters to support supply chains? Of whom?? Specialization!!• Core competencies:

– E‐commerce– Tracking– Demand Planning– Solution orchestrator

Operating Advantages of Logistics Clusters

• Transport Economies of Scope• Economies of Scale• Economies of density• Frequency economies• Shared assets• Expansion Capacity• Shared Labour