Countries Who Invest in Logistics Compete Better

Thursday, November 22, 2007 5:25
Posted in category Uncategorized

A couple of weeks ago, I threw out the argument that the potential success of Vietnam was severely limited over the next 5 years because their logistics infrastructure was not in place to support large amounts of FDI…

Well, as it turns out the World Bank agrees with me, or at least their recent Logistics Performance Index supports that line of thinking in general. Released November 5, the news release says the report:

a study based on a world survey of international freight forwarders and express carriers, indicates that facilitating the capacity to connect firms, suppliers and consumers, is crucial in a world where predictability and reliability are becoming even more important than costs.

The researchers/ authors did a great job at looking at “logistics” as more than the physical movement of goods on a ship by including telecom, services , gov’t department, and a number of other steps/ pieces that need to exist for the entire process… and then they linked that back to the income levels of a country

In this highly competitive world, the quality of logistics can have a major bearing on a firm’s decisions about which country to locate in, which suppliers to buy from, and which consumer markets to enter.

To construct the LPI, researchers focused on (PDF version of questionnaire here):

  • Efficiency of the clearance process by customs and other border agencies.
  • Quality of transport and information technology infrastructure for logistics.
  • Ease and affordability of arranging international shipments.
  • Competence of the local logistics industry.
  • Ability to track and trace international shipments.
  • Domestic logistics costs.
  • Timeliness of shipments in reaching destination.

A global report, there was not a section that was devoted to China, however they did provide the complete results – While I will share with you now.

  • Overall Rank: 30
  • Customs: 35
  • Infrastructure: 30
  • International Shipment: 28
  • Logistics Competence 27
  • Track & tracing 31
  • Domestic Logistics Costs 72
  • Timeliness 36

To support these rankings, the offered the following cuts

  • Rate of Physical Inspection 7%
  • Customs clearance 1.4 days
  • Number of Border Agencies (exports) 4
  • Number of Border Agencies (imports) 4
  • Typical Import Charges for 40′ 388 USD
  • Typical Export Charges for 40′ 380 USD

Now, while I have to say I agree with the underlying conclusion that surface by this report, I do have an issue with some of the findings… after all, it appears that there was little or no weighting for the fact that countries like the U.S. (19th overall) and China (30th overall) are MASSIVE countries like Singapore (#1) , Netherlands (#2), Austria (#5), and Hong Kong (#8) just do not have to overcome a whole lot in comparison… a good port, a few thousand km of roads, and a strong platform of logistics professionals and they have overcome the largest hurdles…. whereas China and the U.S. have to do that on a much larger scale and for countries like China and the U.S., while linked, the domestic and im/ex logistics industries have very different needs and operators.

At any rate, as I pointed out two weeks in the Vietnam post, and as I have mentioned in various China focused posts and reports, the logistics industry really is the key to economic growth, sustainability, and macro-balance. For China, the logistics industry that has been set up for the export market is in many ways the most efficient system in place and it is the only reason they are able to process and ship the hundreds of millions of TEU is does. Domestically though, China is still a mess in many areas… but is improving.

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3 Responses to “Countries Who Invest in Logistics Compete Better”

  1. Romain Guerel (French working in Beijing) says:

    November 23rd, 2007 at 6:59 am

    I completely agree with your statement. Without a good logistic, a country or a company cannot be successful. China is a prime example. Your BIG strategy or your product/sales advantage cannot be implement if your logistic doesn’t follow and in China, logistics can be a nightmare that often can destroy your company development in China.

  2. Rich says:

    November 23rd, 2007 at 10:34 am

    Romain.

    Hope you had a good week in Beijing… how is the air quality? crystal clear here in Shanghai. Even saw a couple of stars last night…

    In addition to the article I highlights about Vietnam, I would also say that more than anything else, India’s biggest hurdle is going to be logistics. Internally and externally. they are way behind in development, and while they have some innovative practices going for internal logistics, I believe that Vietnam will be able to progress as a country much faster as they are smaller and there is immediate business interest.

    Have a good weekend
    Rich

  3. Romain Guerel (French working in Beijing) says:

    November 24th, 2007 at 7:44 pm

    We agree on India. For Vietnam, they have it easier because most of the country is not TOO far from the coast.

    Beijing weather is as always polluted. Hope our French president Sarkozy plane will be able to land today. I am not sure!

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