CONNECTING TO COMPETE The 2014 Logistics Performance Index - - PowerPoint PPT Presentation

March 27, 2014

• Dr. Jean-François Arvis

Senior Economist, The World Bank

• Prof. Lauri Ojala

University of Turku, Finland

CONNECTING TO COMPETE

The 2014 Logistics Performance Index

Transport Business Summit 2014 Brussels

Outline

• 1. Why care about logistics?
• 2. What is the Logistics Performance Index?
• 3. LPI 2014 Results
• 4. Key messages
• 5. The LPI’s role in the policy dialogue
• 6. How the World Bank supports countries in

logistics pollicy-making

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World Bank LPI, Transport Business Summit 2014, Brussels

Why care about logistics?

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World Bank LPI, Transport Business Summit 2014, Brussels

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50% 70% 90% 110% 130% 150% 170% 190% 210% 230% 250% 2 2,5 3 3,5 4 4,5

LPI score (2010)

Country trade costs of goods value vs. LPI score

Why Logistics Matters

Supply chain bottlenecks are the primary cause of friction in trade (trade costs). Reducing them by half would raise trade by 15% and production by 5% globally.

World Bank LPI, Transport Business Summit 2014, Brussels

Average trade costs of goods value

Logistics Performance and Connectivity

Elasticity of trade costs 0,1 0,2 0,3 0,4 0,5 0,6 Distance Common Border Common Language Same RTA Tariffs Shipping Connectivity Air Connectivity Logistics Performance Cost of Starting Business Exchange Rate

Domestic Costs Bilateral Costs

Source: World Bank, Trade Costs in the Developing World 2013. (RTA = Regional Trade Agreement) 5

Besides distance, connectivity and logistics performance matter more than other trade barriers in boosting trade.

Geography and (most of) shipping connectivity are

• ut of a country’s

control, but policy decisions are not.

World Bank LPI, Transport Business Summit 2014, Brussels

Logistics costs impact productivity

Reliability is often more important than freight costs

Logistics costs increase with decreasing logistics performance. Most of this increase comes from lower reliability and the need to increase inventory (“other costs”).

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Firm-level logistics expenditures as % of sales in 2011-2012

Sources: Authors, for Germany: TU Berlin, for Brazil: ILOS, for Finland: Turku School of Economics

7% 7% 5% 5% 13% 9% 7% 4%

0% 5% 10% 15% 20% Kazakhstan Estonia Finland Germany

Transport cost Other logistics costs

World Bank LPI, Transport Business Summit 2014, Brussels

What is the Logistics Performance Index (LPI)?

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World Bank LPI, Transport Business Summit 2014, Brussels

Point of Origin Seller’s Factory Alongside Vessel Delivery to Dock Exporting Country Delivered to Buyer’s Warehouse Frontier/ Border

Supply Chain Framework & the six LPI dimensions

Unloaded

• n Dock

Importing Country

Customs Infrastructure Services Quality Timeliness International shipments Tracking and Tracing

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World Bank LPI, Transport Business Summit 2014, Brussels

LPI outline

• Built on > 5,000 country assessments

by over 1,000 freight forwarders & logistics professionals worldwide

• Survey in cooperation with partners
• Respondents rate logistics performance
• f own country and 8 other countries on

a scale of 1 to 5

• Coverage: 160 countries in LPI 2014
• Published every 2 years
• LPI editions: 2007, 2010, 2012 & 2014

Partnerships

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World Bank LPI, Transport Business Summit 2014, Brussels

What do we measure?

Here’s a sample question of the Domestic LPI:

Source: LPI 2013/2014 Survey 10

The LPI survey is based on expert assessments of logistics professionals (perception-based)

World Bank LPI, Transport Business Summit 2014, Brussels

LPI 2014 Results

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World Bank LPI, Transport Business Summit 2014, Brussels

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LPI data and report at: lpi.worldbank.org

World Bank LPI, Transport Business Summit 2014, Brussels

Good News: All countries performing better

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With the right investment and policies, lower income countries can also be high performers.

30 40 50 60 70 80 90 Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Percentage of highest LPI score 2014 2012 2010 2007

Countries in bottom quintile saw the largest improvements (2007-2014).

LPI score as percentage of highest LPI score by LPI quintile; 2007, 2010, 2012 and 2014

World Bank LPI, Transport Business Summit 2014, Brussels

Income level helps little without aligned policies

Countries by LPI 2014 overall score and GDP/capita

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World Bank LPI, Transport Business Summit 2014, Brussels

LPI 2014: Top 10 European performers

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1 2 3 4 6 8 11 13 17 18

4,1 4,0 4,0 4,0 4,0 3,9 3,9 3,8 3,8 3,7

5 10 15 20 Germany Netherlands Belgium United Kingdom Sweden Luxembourg Ireland France Denmark Spain LPI rank LPI score

World Bank LPI, Transport Business Summit 2014, Brussels

LPI 2014 rank out of 160 economies

LPI is a surveyscores are Confidence Intervals

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2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP Score 2014

World Bank LPI, Transport Business Summit 2014, Brussels

EU 28 sorted by LPI 2014 score

LPI score range: 1 = lowest; 5 = highest

LPI is a surveyscores are Confidence Intervals

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2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP Score 2014 Score 2012

World Bank LPI, Transport Business Summit 2014, Brussels

EU 28 sorted by LPI 2014 score

LPI score range: 1 = lowest; 5 = highest

LPI is a surveyscores are Confidence Intervals

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2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP Score 2014 Lower bound 2014 Upper bound 2014

World Bank LPI, Transport Business Summit 2014, Brussels

EU 28 sorted by LPI 2014 score

LPI score range: 1 = lowest; 5 = highest

LPI is a surveyscores are Confidence Intervals

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2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP Score 2014 Score 2012 Lower bound 2014 Upper bound 2014

World Bank LPI, Transport Business Summit 2014, Brussels

EU 28 sorted by LPI 2014 score

LPI score range: 1 = lowest; 5 = highest

LPI is a surveyscores are Confidence Intervals

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2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP Score 2014 Score 2012 Score 2007-2014 Lower bound 2014 Upper bound 2014

EU 28 sorted by LPI 2014 score

World Bank LPI, Transport Business Summit 2014, Brussels

LPI score range: 1 = lowest; 5 = highest

Aggregated data for 2007-2014 less volatile

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World Bank LPI, Transport Business Summit 2014, Brussels

10 20 30 40 50 60 70 80

DEU NLD BEL GBR SWE LUX DNK FRA FIN IRL AUT ESP ITA PRT POL CZE HUN SVN LVA SVK EST ROM BGR LTU GRC CYP MLT HRV

Rank 2014 out of 160 Rank 2012 out of 155 Weighted rank 2007-2014 out of 166 EU 28 sorted by weighted* LPI 2007-2014 rank

*) Weights: 2014 = 53.3%; 2012 = 26.7%; 2010 = 13.3%; 2007 = 6.7 %

LPI 2014: Top 10 performers by income group

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2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Malaysia China Turkey Hungary South Africa Thailand Romania Panama Bulgaria Mexico

Top 10 upper middle-income

2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Vietnam Indonesia India Philippines Ukraine Egypt, Arab Rep. El Salvador Pakistan Nigeria Guatemala

Top 10 lower middle-income

2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Malawi Kenya Rwanda Cambodia Burkina Faso Liberia Ethiopia Nepal Burundi Bangladesh

Top 10 low-income

2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Germany Netherlands Belgium United Kingdom Singapore Sweden Norway Luxembourg United States Japan

Top 10 overall

By overall LPI score

World Bank LPI, Transport Business Summit 2014, Brussels

Key messages

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World Bank LPI, Transport Business Summit 2014, Brussels

Key messages from the LPI 2014

• The gap between the best and worst logistics performers is

slowly narrowing, confirming trends from LPI 2007-2012 reports.

• Although a country's level of development plays an important role

in its logistics performance, policies do matter. Over-performing countries such as Indonesia have carried out targeted reforms to improve the efficiency of their logistics.

• In terms of trade facilitation, customs show a steady improvement

across the board but other border control agencies lag behind.

• Weakest link paradigm: The challenge is to get right a number
• f reforms in parallel and in several areas. This explains a lot of

churning in scores and rank in the middle of the sample.

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World Bank LPI, Transport Business Summit 2014, Brussels

The “Services Gap”

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2 4 6 8 10 12

Low income Lower middle income Upper middle income

%-change in LPI component as measured against the highest performer, 2007-2014 Customs Infrastructure Quality of logistics and services

Supply chain efficiency depends

• n the quality of private services

moving the goods. If logistics service delivery is poor, even good physical connectivity is not enough.

World Bank LPI, Transport Business Summit 2014, Brussels

Persistent & large differences in border process efficiency

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The import lead time for port and airport supply chains is more than twice as long in low-performing countries as in high-performing

• nes.

Import lead time in days (port/airport) by LPI quintile

1 2 3 4 5 6 7

Bottom quintile (lowest performance) Fourth quintile (low performance) Third quintile (average performance) Second quintile (high performance) Top quintile (highest performance)

Import Lead Time (Days)

World Bank LPI, Transport Business Summit 2014, Brussels

Key LPI messages for different income levels

Key message for low-income countries: Progress in logistics performance is driven by improvement in infrastructure and basic border management reforms. Key message for middle-income countries: Focus moves from infrastructure and border management to development of logistics services with growing demand for

• utsourced logistics.

In more sophisticated logistics environments, the “low hanging fruits” have largely been reaped. The new generation of reforms is more complex, involves many stakeholders, and takes time. Key message for high-income countries: The demand for environmentally friendly logistics services is growing in advanced economies.

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World Bank LPI, Transport Business Summit 2014, Brussels

Looking for environmental logistics solutions

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0% 5% 10% 15% 20% 25% 30% 35% 40%

Low income Middle Income High income: nonOECD High income: OECD

2014 2012

The percentage of respondents looking for environmentally friendly shipping alternatives is growing, and is the highest in advanced economies.

Percentage of respondents looking for ‘green’ shipping alternatives

World Bank LPI, Transport Business Summit 2014, Brussels

The LPI’s role in the policy dialogue

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World Bank LPI, Transport Business Summit 2014, Brussels

What is the role of the LPI?

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The LPI

• Is an overall metric of supply chain efficiency.
• Provides information of where a country stands

and a broad indication of problem areas.

• Is not a diagnostic tool and needs to be supported

by specific tools designed to perform that function.

The LPI has had a significant impact in raising

awareness and pushing for comprehensive “connectivity” and logistics policies, e.g. in the EU, Kazakhstan, APEC and Indonesia.

World Bank LPI, Transport Business Summit 2014, Brussels

Policies matter to Logistics Performance

• Ports
• Road/rail corridors
• Airports
• PPP

Infrastructure

• Customs, payments etc.:
• Simplification & automation
• Harmonization & standardization
• Modernization & governance of border agencies

Procedures and Trade Facilitation

• Forwarders, truckers, brokers etc.
• Regulation of entry
• Market structure and competition
• Competence and quality of service

Services

• «Green Logistics»
• City Logistics
• Food security

Sustainable Logistics

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Regulations (customs, services) are increasingly regional (e.g. EU), but implementation national.

World Bank LPI, Transport Business Summit 2014, Brussels

How the World Bank supports countries in Logistics policy-making

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World Bank LPI, Transport Business Summit 2014, Brussels

World Bank lending projects in logistics

World Bank Group lending in FY 2013 USD 52.6 bn

 7-8% of the lending portfolio is logistics-related, e.g. in:

• International Trade corridors:
• Eastern Europe, Central Asia, Central Africa, India, Nepal, Central

America, East & South Africa

• Internal corridors, ports:
• Brazil, China, Argentina, Indonesia
• Customs & fiscal reforms:
• Kazakhstan, Russia, Laos, Philippines, Cambodia
• Export development:
• Tunisia, Latin America

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World Bank LPI, Transport Business Summit 2014, Brussels

World Bank advisory work in logistics

Advisory services to national governments and increasingly to regions, for example, in:

• Greece, Eastern Europe, Central Asia
• Morocco, Tunisia
• Western Africa, East Africa, Zambia, Zimbabwe
• Colombia, Argentina, Brazil, Uruguay, Peru, Central America
• Indonesia, Vietnam, Philippines, Cambodia, Laos

 Increasingly “fee for service” 34

Concept: Exploit synergies between institutional reforms and infrastructure investment.

World Bank LPI, Transport Business Summit 2014, Brussels

World Bank’s related indicators

• Doing Business Report
• Trading across Borders Indicator, a red tape metric

e.g. number of document vs. Supply Chain efficiency

• Bilateral Trade Costs Database
• Since 2013 with trade division of UNESCAP
• New cross-country indicators:

1.

Aggregated trade costs by countries

2.

Air Connectivity Index (with FAA and IATA)

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World Bank LPI, Transport Business Summit 2014, Brussels

Thank you!

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World Bank LPI, Transport Business Summit 2014, Brussels