Web-based Survey in: 1,000+ individual respondents. Responses from 130 countries. 5,000+ individual country evaluations

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1 Turku School of Economics, Finland International Federation for Freight Forwarders Associations Addressing transport barriers on border crossings in the Western Balkans, SEETO Podgorica, 27 March 2012 Logistics Performance Index (LPI) and SEETO countries & Measuring national level logistics costs Background to LPI First report & data launched on Nov. 5, LPI 2010 launched by WB President Robert B Zoellick in Berlin on Jan. 15, 2010 Worldwide media coverage Prof. Dr. Lauri Ojala Turku School of Economics University of Turku, Finland Lauri.ojala@utu.fi Global Facilitation Partnership for Transportation and Trade December 24, LPI 2012 out in April 2012 Podgorica, March 26, 2012 Prof. Ojala 2 What is the LPI? A set of indicators that measure the performance of the trade logistics environment of countries Data for the LPI Logistics professionals in international freight forwarding operations LPI 2010 data collection Web-based Survey in: English, French, Spanish, Chinese & Russian 1,000+ individual respondents Responses from 130 countries 5,000+ individual country evaluations Seen from the outside Also domestic data from 100 countries Seen from the inside with a smaller N Podgorica, March 26, 2012 Prof. Ojala 3 Podgorica, March 26, 2012 Prof. Ojala countries based on 5,000+ individual country assessments evaluated on: Customs and other border procedures Transport and IT infrastructure & services Availability of affordable shipments Logistics competence Tracking and tracing of shipments Timeliness of shipments Measures how easy or difficult a country s Trade Logistics is as seen from the outside More applicable to trade of manufactures by air, containers, rail or trailers than to bulk shipping Podgorica, March 26, 2012 Prof. Ojala 5 Overall LPI 2010 scores on a World map Podgorica, March 26, 2012 Prof. Ojala 6 1

2 LPI 2010 of 155 countries. S-pore #2 U.S. #15 China #27 Brazil #41 MEX #50 Source : Arvis, Mustra, Ojala, Shepherd & Saslavsky (2010) Connecting to Compete Old EU countries rank high in trade logistics performance Podgorica, March 26, 2012 Prof. Ojala 7 e [min 1, max 5] LPI 2010 overall score SEETO countries confidence interval (CI) wide due to variation and low no. of assessments 5,0 LPI Score 4,5 Lower Bound 4,0 Upper Bound 3,5 3,0 2,5 2,0 1,5 1,0 Countries organised by average score Podgorica, March 26, 2012 Prof. Ojala 8 SEETO countries by scores and CI s with Germany, Turkey and Greece LPI scores, a 50-page report, tables & maps freely available at: f 155 countries LPI 2010 rank out of LPI Rank Lower Bound Upper Bound Podgorica, March 26, 2012 Prof. Ojala 9 Podgorica, March 26, 2012 Prof. Ojala 10 Income level alone does not explain countries trade logistics performance Four categories of trade logistics performance more useful than a single rank or score The boundaries for the four categories indicative only Logistics friendly Consistent Performers Partial Performers Logistics unfriendly Podgorica, March 26, 2012 Prof. Ojala 11 Podgorica, March 26, 2012 Prof. Ojala 12 2

3 Typical kinds and degrees of logistics trade constraints, by country logistics performance group and area of logistics impediment es [min 1, max 5] LPI 2010 score 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 Three of LPI s six dimensions with relevance to border crossing Customs & Border Tracking & tracing Timeliness Based on LPI 2007 and 2010 Podgorica, March 26, 2012 Prof. Ojala 14 Evidence based on LPI findings: Conclusion on LPI Poor logistics performance penalises in two principal ways: Out of pocket costs are high & Service quality is low causing a lot of induced costs A pragmatic indicator seen from the outside on how easy or difficult countries Trade Logistics is The resolution is rather low, but the LPI correlates very well with other datasets SEETO countries performance is below what their economic level would imply on all 6 dimensions measured Podgorica, March 26, 2012 Prof. Ojala 15 Podgorica, March 26, 2012 Prof. Ojala 16 National logistics studies/surveys But how to measure logistics performance and costs at an aggregate level? Statistics-based studies applying models Econometric Other modelling approaches Case study-based approaches Surveys using questionnaires Comprehensive themes Single-theme surveys Podgorica, March 26, 2012 Prof. Ojala 17 Podgorica, March 26, 2012 Prof. Ojala 18 3

4 However, severe knowledge gaps on logistics performance indicators & costs Lack of uniform methods & terminology Very few cross-country studies made, thus little comparative data exists across Countries Industries Examples of statistics-based logistics studies Annual State of Logistics Report U.S 1989 Bowersox, Rodrigues, Calantone & Closs, Stank 1999, -02,-05 South Africa State of Logistics Survey 2003 Brazil (ILOS) 2006 Europe Top 100 of logistics providers 2007 Norway (TÖI) 2008 Svensk Makrologistik (Sweden) 2008 Comparisons across studies problematic Podgorica, March 26, 2012 Prof. Ojala 19 World Bank case studies on national logistics costs in Low-Income countries Estimating Albania s trade logistics costs (2007) Arvis: Sub-Saharan and North Africa 2003 Ojala: Moldova, Albania, Ukraine, Central Asia 2003 Naula: Central Asia 2007 Much of these are related to border crossing issues, and these can also be affected by better bordercrossing performance orld Bank Source: Ojala for The Wo Podgorica, March 26, 2012 Prof. Ojala 21 Podgorica, March 26, 2012 Prof. Ojala 22 Ex. of broad surveys using questionnaires ELA & A.T. Kearney Master of Logistics Finland State of Logistics German Logistics Association BVL Norwegian Logistics barometer SCI Logistics barometer Germany 2000s 3+ ASLOG L'Etat de l'art de la logistique française 2005/ McKinsey Global Supply Chains 2006 & State of Logistics: The Canadian Report LogOn Baltic Logistics Survey World Bank Logistics Performance Index Swiss Logistics market, St. Gallen University Examples of single-theme logistics surveys on markets, M&A, outsourcing, industry etc. Davis database Cap Gemini, Georgia Tech Supply Chain Digest IBM & GMA Eyefortransport Datamonitor CSCMP Country profiles PriceWaterhouseCoopers Transport Intelligence & Kewill Unisys Outsourcing Study PRTM European SC trends Accenture Global Fulfillment Penske PL CEO Survey CTH Alumni Day, Aug 24, 2011 Ojala23 CTH Alumni Day, Aug 24, 2011 Ojala24 4

5 How high are logistics costs for manufacturing and trading firms? No statistical nor accounting term on firm or macro levels therefore conceptions inevitable vary Compared to Sales? Total Costs? GDP? Translation and educational issues are also prevalent in cross-cultural studies Logistics costs often 5--points higher in self-reported than in statistics-based studies Delimiting the object of analysis difficult How broad/narrow a scope along the supply chain? How to treat domestic vs. international operations? How to treat in-house vs. outsourced operations? Self-reporting subjective; aggregation may lead to double counting across sectors and supply chains Statistics cover national transport and storage cost; selfreported data also include international supply chains Podgorica, March 26, 2012 Prof. Ojala 25 Podgorica, March 26, 2012 Prof. Ojala 26 For high value adding firms, transport is a small part of logistics costs Main approaches in studies measuring aggregate level logistics costs Type of Logistics Cost Direct transport, warehousing, materials management... Indirect Transport packaging, facilities, inventory carrying, administration, IT... Other Obsolecence costs, lost sales customer service levels... Value added Low High 13% 7 % 3 % Typical costs as sales Questionnairebased survey Statistics-based studies Supply-side data Logistics providers Selected examples U.S. State of Logistics South Africa Brazil Norway Europe Top 100 Finland Germany (BVL) Switzerland Thailand Sweden Demand side data Logistics users Podgorica, March 26, 2012 Prof. Ojala 27 Podgorica, March 26, 2012 Prof. Ojala 28 Logistics costs on average 12-1 of net sales (manufacturing and trading) ,1 % 0,7 % 0,9 % 1,5 % 3,1 % 2,7 % 4,1 % 14, 1,1 % 0, 0,9 % 3, 2, 5,5 % 11,9 % 1,1 % 0, 0,9 % 34% 3,4 2,1 % 3, Other logistics cost Transport packingcosts Logistics administrationcosts Inventory carryingcosts Warehousingcosts Transportation costs N = 1,000+ Self-reported data Finland State of Logistics 2010, available in Finnish at: Podgorica, March 26, 2012 Prof. Ojala 29 Logistics Costs as a GDP in Brazil 12.1% 11.5% 11.6% 0.4% 0.4% 0.4% 0.6% 0.6% 0.7% 3.6% 3.7% 3.5% 7.5% 6.8% 6.9% Administrativo Administration Armazenagem Warehousing Estoque Inventory Transporte Transportation Source: ILOS Institute Podgorica, March 26, 2012 Prof. Ojala 30 5

6 ELA/ A.T. Kearney Supply Chain Excellence Covers Europe with very limited survey data, N = 100+ sales Finland State of Logistics surveys Extensive survey data; N = up to 2,700 sales Podgorica, March 26, 2012 Prof. Ojala 31 Podgorica, March 26, 2012 Prof. Ojala 32 Swedish macro logistics: Vinnova/Lund Covers Sweden based on very detailed statistics on logistics users GDP U.S. State of Logistics by CLM/CSCMP Covers U.S. by modelling statistical data GDP Podgorica, March 26, 2012 Prof. Ojala 33 Podgorica, March 26, 2012 Prof. Ojala 34 State of Logistics South Africa Covers RSA by modelling statistical data GDP German Logistics Association BVL Covers Germany, based on survey data Share of total 1 cost Podgorica, March 26, 2012 Prof. Ojala 35 Podgorica, March 26, 2012 Prof. Ojala 36 6

7 Comparison of data across studies impossible, but broad trends over time might be found Costs indexed; 2008 = 100 World Bank s LPIO initiative to improve Logistics Cost & Performance analysis Work is underway to collect existing knowledge Logistics Perfomance International Observatory, LPIO Starting mainly from High Income countries Analytic tools for Middle & Low Income countries Combining multiple / most suitable methods Podgorica, March 26, 2012 Prof. Ojala 37 Helping to find comparable interpretations for logistics costs & other KPI s F K o C Need for national level logistics cost studies in addition to Supply Chain diagnostics e.g. in the SEETO Strategic Work programme ? Podgorica, March 26, 2012 Prof. Ojala 38 Thank you for your attention! Podgorica, March 26, 2012 Prof. Ojala 39 Selected references: ELA and AT Kearney (2004) Differentiation for Performance Excellence in Logistics, ELA and AT Kearney (2007) Innovation Excellence in Logistics 2007, Finland State of Logistics 2006; Naula, Ojala and Solakivi (2006) MoTC publications 45/ Finland State of Logistics 2009; Solakivi, Ojala et al. (2009) MoTC publications 21/ Finnish Logistics Survey Ministry of Transport and Communications publications 6/1993 Finnish Logistics Survey Ministry of Transport and Communications publications 33/1997 Finnish Logistics Survey Ministry of Transport and Communications publications 52/2001 Ittmann, HW, King, DJ, Maspero, EL et al. (2008) Fourth annual state of logistics survey for South Africa 2007: logistics for regional growth and development Langley, J. and Dort, E. and Ang, A. and Sykes, S.(2007) 2007 Third-Party Logistics, Results and Findings of the 12th Annual Study, Ojala, Solakivi, Hälinen, Lorentz and Hoffmann (2007) State of Logistics in the Baltic Sea Region, LogOn Baltic 3: Rodrigues, A.M, Bowersox, D.J, Calantone, R.J, (2005) Estimation of Global and National Logistics Expenditures: 2002 Data Update. Journal of Business Logistics, Vol.26, No. 2, 1-16 Supply Chain & Logistics Association Canada (2008) State of Logistics, The Canadian Report 2008 Transport Intelligence (2008) Logistics & transport Industry Environmental Survey Töyli, Häkkinen, Ojala, Naula (2008) Logistics and financial performance - An analysis of Finnish small and medium-sized enterprises, Int. J. of Physical Distribution and Logistics Management, 38, 1, Guasch J.L Kogan J (2006) Inventories and Logistic Costs in Developing Countries: Levels and Determinants A Red Flag for Competitiveness and Growth. Policy Research Working Paper Washington DC: World Bank Guerrero P - Lucenti K Galarza S (2010) Trade Logistics and Regional Integration in Latin America and the Caribbean, ADBI Working Paper Series No. 233 Barbero J A (2010) Freight Logistics in Latin America and the Caribbean: An Agenda to Improve Performance, Inter American Development Bank Infrastructure and Environment Department, TECHNICAL NOTES No. IDB TN 103 Podgorica, March 26, 2012 Prof. Ojala 40 7