Ireland as a virtual hub?

23 Sep 2003

Like the many contradictions that make up a good thing, Ireland’s existing logistical and transport nightmare might eventually lead to creating the skillsets that could turn the country into a supply chain management (SCM) powerhouse.

Anyone who travels can see that the country has plummeted into what can only be described as a transportation quagmire. Countrywide rail networks are inadequate. Seaports are mostly located to the east of the country and port tunnels through busy cities are far from completion. Irish city and town streets are congested with traffic most of the time and the M50 around Dublin at the key points of the working day is at most a glorified car park.

Proposals to turn a perfectly good military airport on the south-west of Dublin into prime business/logistics hub have been overturned by short-sighted transport planners, leaving trucks carrying the bulk of Dublin and Leinster’s manufacturing output to struggle through gridlocked streets and highways. As well as this, Dell executives in Limerick complain that it takes on average three days to get produce to Europe. The result is the gradual loss of major fulfilment and logistical activities to locations on the European mainland such as the Netherlands and the Czech Republic.

For a country anxious to compete with fast-rising locations on mainland Europe, we are making a meal of it. However, according to Randal Faulkner, director of consulting at the National Institute of Transport and Logistics (NITL), Ireland’s industrial planners need to start thinking outside the box and move towards the notion of virtual manufacturing driven by SCM technologies and techniques. SCM effectively marries the islands of technology that make up the vital stages of manufacturing and selling a product, ranging from procurement systems and manufacturing software to logistics management solutions and customer relationship management (CRM) technologies.

“SCM is about buying, making, moving and selling a product,” explains Faulkner. “Traditionally, these areas have been managed in isolation and have always been in conflict with each other. Transport managers will only shift stock in full loads to minimise cost and maximise efficiency, which creates a conflict with the manufacturer who will only make to order and the salesman at the other end who makes wild promises to the end customer. The idea behind SCM is to optimise all of this.”

He agrees that Ireland has logistical and transport problems: “But if we’re clever, Ireland may never need to see the product. The world order is changing, manufacturing is shifting to lower cost locations and you could run a successful business from here without the product ever having to be made in Ireland. SCM and the activity around it could make that happen. SCM is extremely important to Ireland.”

Faulkner highlights a colleague at Hewlett-Packard Ireland who manages the international manufacturing and distribution of certain product lines, yet no product lands on these shores. “Virtual management of manufacturing is the answer when lower cost economies begin to become more apt places to make goods cheaply. If you look at what has happened with the loss of jobs at 3Com in recent weeks, it is still keeping research and development (R&D) in Ireland. We are seeing an end to the days of physical manufacturing of such goods in Ireland, so we need to start thinking about the next level. By excelling in SCM skills and help manage and co-ordinate the global supply of goods, Ireland needn’t suffer. If we can get companies to retain R&D, sales and marketing and SCM here, we have a very bright future in Ireland,” he continues.

He believes the country is at a serious disadvantage to rival service markets. “What we need to be is slicker at functions like SCM and R&D. We can be better at managing the logistics function than other countries,” Faulkner says, highlighting the example of a French automotives firm that has located its European distribution centre in Connemara. “The whole reason why SCM has emerged as a sexy issue is because of IT. You could never do it if you couldn’t link all of those various islands of information.”

Creating the relevant skillsets that would make Ireland a hot SCM location, Faulkner says, is of vital importance. The NITL, which came into being as a result of a strategy report by Forfás seven years ago and is funded under the National Development Plan, offers a masters degree, a diploma and a certificate in SCM. As well as this, University College Dublin is also offering a masters degree in the subject.

Despite the opportunities that the virtual management of logistics and SCM affords, Ireland still needs to get its physical assets in order if it wants to be seen as a credible player on the world stage, argues Ann Potter, a consultant specialising in SCM and logistics at Deloitte & Touche.

“SCM is effectively an overarching view of how things happen in business. We have some absolutely world-class logistics and fulfilment operations in Ireland and we have huge benefits around awareness, knowledge and trained people. We just need to make these advantages good enough to counter the threat of competition from countries such as the Czech Republic, which has natural geographic advantages by being at the centre of Europe and having just roads and rail to consider rather than air and seaports,” she says.

Potter outlines the problem that Ireland faces succinctly: “Every single aspect of our transport and logistics infrastructure is handled by different bodies and organisations that don’t seem to be very good at talking to each other. It’s a question of linking organisations like the NITL and IBEC and the various businesses with the various government departments that look after everything from road, rail and air to canals and seaports.

“Technology has allowed visibility of steps along the way in planning and co-ordinating the movement of goods, such as GPS transmitters that allow planners to follow the movement of raw materials and end products, but Ireland still seems to be on the periphery when it comes to deploying these technologies,” she explains.

She also indicates that the huge dependence on Dublin in terms of infrastructure stresses as another major problem. “Newer models should be examined, such as centralised drop zones spread throughout the country so that goods can be delivered in large multiples in a centralised manner rather than trucks trundling through towns and villages to drop off goods at individual stores,” Potter adds.

Echoing Faulkner’s point about how Ireland could become a centre of excellence for SCM and logistics management, Potter says that it is a question of businesses, planners and policy makers “working smarter” in terms of harnessing intellectual power over geographic disadvantage. “Organisations such as IDA Ireland are saying that it is no longer good enough for Ireland to be the cheapest venue for making goods, that is a unique selling point that has a sell-by date. We don’t have the natural advantages that locations on mainland Europe have. But organisations are remaining in Ireland because there are advantages unique to Ireland, particularly in terms of intellectual developments and management expertise. We have tremendous potential in the area of SCM,” Potter says.

Faulkner concludes: “Information is the lifeblood of SCM, but well-trained people are vital. Enablers can make it work.”

By John Kennedy