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CONNECTING TO COMPETE

The 2014 Logistics Performance Index


Transport Business Summit 2014
Brussels
Dr. Jean-Franois Arvis
Senior Economist, The World Bank
Prof. Lauri Ojala
University of Turku, Finland
March 27, 2014

Outline
1. Why care about logistics?
2. What is the Logistics Performance Index?

3. LPI 2014 Results


4. Key messages
5. The LPIs role in the policy dialogue
6. How the World Bank supports countries in
logistics pollicy-making
World Bank LPI, Transport Business Summit 2014, Brussels

Why care about logistics?

World Bank LPI, Transport Business Summit 2014, Brussels

Average trade costs of goods value

Why Logistics Matters


Country trade costs of goods value vs. LPI score
250%
230%
210%
190%
170%
150%
130%
110%
90%
70%
50%
2

2,5

3,5

4,5

LPI score (2010)

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

Logistics Performance and Connectivity


Exchange Rate
Cost of Starting Business
Logistics Performance
Air Connectivity
Shipping Connectivity
Tariffs
Same RTA
Common Language
Common Border
Distance
0
Elasticity of trade costs

Domestic
Costs

Bilateral
Costs

0,1

0,2

0,3

0,4

0,5

Geography and
(most of) shipping
connectivity are
out of a countrys
control, but policy
decisions are not.

0,6

Besides distance, connectivity and logistics performance


matter more than other trade barriers in boosting trade.
Source: World Bank, Trade Costs in the Developing World 2013.

(RTA = Regional Trade Agreement)

World Bank LPI, Transport Business Summit 2014, Brussels

Logistics costs impact productivity


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

Germany

5%

4%
Other logistics costs

Finland

5%

Estonia

7%

Kazakhstan

7%

0%

7%

9%

13%

5%

10%

15%

20%

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

World Bank LPI, Transport Business Summit 2014, Brussels

What is the
Logistics
Performance
Index
(LPI)?

World Bank LPI, Transport Business Summit 2014, Brussels

Supply Chain Framework & the six LPI dimensions


Timeliness
International
shipments

Customs

Tracking and Tracing


Infrastructure
Delivery Alongside
Vessel
to Dock

Unloaded
on Dock

Point of Origin
Sellers Factory

Services
Quality

Frontier/
Border

Delivered to
Buyers
Warehouse

Importing Country
Exporting Country
World Bank LPI, Transport Business Summit 2014, Brussels

LPI outline
Partnerships

Built on > 5,000 country assessments


by over 1,000 freight forwarders &
logistics professionals worldwide
Survey in cooperation with partners
Respondents rate logistics performance
of 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

World Bank LPI, Transport Business Summit 2014, Brussels

What do we measure?
Heres a sample question of the Domestic LPI:

Source: LPI 2013/2014 Survey

The LPI survey is based on expert


assessments of logistics professionals
(perception-based)
World Bank LPI, Transport Business Summit 2014, Brussels

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LPI 2014 Results

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

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Good News: All countries performing better


Percentage of highest LPI score

2014

2012

2010

2007

90
80
70
60

With the right


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

50
40
30
Bottom
quintile

Fourth
quintile

Third quintile

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

Top quintile

LPI score as percentage of highest LPI score by LPI quintile;


2007, 2010, 2012 and 2014
World Bank LPI, Transport Business Summit 2014, Brussels

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Income level helps little without aligned policies


Countries by LPI 2014 overall score and GDP/capita

World Bank LPI, Transport Business Summit 2014, Brussels

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LPI 2014: Top 10 European performers


0
Germany
Netherlands
Belgium
United Kingdom

5
1

10

15

20

4,1

LPI rank

4,0

LPI score

4,0

4,0

Sweden

4,0

Luxembourg

3,9

Ireland

3,9

France

3,8

Denmark

3,8

Spain

3,7

6
8
11
13
17
18

LPI 2014 rank out of 160 economies


World Bank LPI, Transport Business Summit 2014, Brussels

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LPI is a surveyscores are Confidence Intervals


4,5

EU 28 sorted by LPI 2014 score

4,3
4,1
3,9
3,7

3,5
3,3
3,1
Score 2014
2,9
2,7

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

2,5

LPI score range: 1 = lowest; 5 = highest


World Bank LPI, Transport Business Summit 2014, Brussels

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LPI is a surveyscores are Confidence Intervals


4,5

EU 28 sorted by LPI 2014 score

4,3
4,1
3,9
3,7

3,5
3,3

Score 2014

3,1
2,9
2,7

Score 2012

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

2,5

LPI score range: 1 = lowest; 5 = highest


World Bank LPI, Transport Business Summit 2014, Brussels

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LPI is a surveyscores are Confidence Intervals


4,5

EU 28 sorted by LPI 2014 score

4,3
4,1
3,9
3,7

3,5
3,3

Score 2014

3,1
Lower bound 2014
2,9
2,7

Upper bound 2014


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

2,5

LPI score range: 1 = lowest; 5 = highest


World Bank LPI, Transport Business Summit 2014, Brussels

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LPI is a surveyscores are Confidence Intervals


4,5

EU 28 sorted by LPI 2014 score

4,3
4,1
3,9
3,7

3,5
3,3

Score 2014

3,1

Score 2012

2,9

Lower bound 2014

2,7

Upper bound 2014

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

2,5

LPI score range: 1 = lowest; 5 = highest


World Bank LPI, Transport Business Summit 2014, Brussels

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LPI is a surveyscores are Confidence Intervals


4,5

EU 28 sorted by LPI 2014 score

4,3
4,1
3,9
3,7

3,5
3,3
3,1

Score 2014
Score 2012
Score 2007-2014

2,9
2,7

Lower bound 2014


Upper bound 2014

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

2,5

LPI score range: 1 = lowest; 5 = highest


World Bank LPI, Transport Business Summit 2014, Brussels

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HRV

MLT

CYP

GRC

LTU

BGR

ROM

EST

SVK

LVA

SVN

HUN

CZE

POL

PRT

ITA

ESP

AUT

IRL

FIN

FRA

DNK

LUX

SWE

GBR

BEL

NLD

DEU

Aggregated data for 2007-2014 less volatile


0

EU 28 sorted by weighted*

10

LPI 2007-2014 rank


20
30
40
50

Rank 2014 out of 160

60

Rank 2012 out of 155


70
80

Weighted rank 2007-2014 out of 166


*) Weights: 2014 = 53.3%; 2012 = 26.7%; 2010 = 13.3%; 2007 = 6.7 %
World Bank LPI, Transport Business Summit 2014, Brussels

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LPI 2014: Top 10 performers by income group


Top 10 overall

Top 10 upper middle-income

By overall LPI score


2,4

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

2,8

3,0

3,2

3,4

3,6

3,8

4,0

4,2

4,0

4,2

Malaysia
China
Turkey
Hungary
South Africa
Thailand
Romania
Panama
Bulgaria
Mexico

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

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

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

2,6

Top 10 low-income
2,4

2,6

2,8

Malawi
Kenya
Rwanda
Cambodia
Burkina Faso
Liberia
Ethiopia
Nepal
Burundi
Bangladesh
World Bank LPI, Transport Business Summit 2014, Brussels

3,0

3,2

3,4

3,6

3,8

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Key messages

World Bank LPI, Transport Business Summit 2014, Brussels

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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
of reforms in parallel and in several areas. This explains a lot of
churning in scores and rank in the middle of the sample.
World Bank LPI, Transport Business Summit 2014, Brussels

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The Services Gap


Customs
12

Infrastructure

Quality of logistics and services

Supply chain efficiency depends


on the quality of private services
moving the goods.

10

If logistics service delivery is


poor, even good physical
connectivity is not enough.

%-change 8
in LPI
component
as measured
6
against
the highest
performer,
2007-2014 4

Low income

Lower middle Upper middle


income
income

World Bank LPI, Transport Business Summit 2014, Brussels

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Persistent & large differences in border process efficiency


Import lead time in days (port/airport)
by LPI quintile
7

The import lead


time for
port and airport
supply chains is
more than twice
as long in
low-performing
countries as in
high-performing
ones.

Import Lead Time (Days)

6
5
4
3

2
1
0

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

World Bank LPI, Transport Business Summit 2014, Brussels

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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
outsourced 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.
World Bank LPI, Transport Business Summit 2014, Brussels

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Percentage of respondents looking for


green shipping alternatives

Looking for environmental logistics solutions


40%
35%
30%

2014

2012

25%
20%

15%
10%
5%
0%
Low income

Middle Income

High income:
nonOECD

High income:
OECD

The percentage of respondents looking for


environmentally friendly shipping alternatives is
growing, and is the highest in advanced economies.
World Bank LPI, Transport Business Summit 2014, Brussels

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The LPIs role in the policy dialogue

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What is the role of the LPI?


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

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Policies matter to Logistics Performance


Infrastructure

Ports
Road/rail corridors
Airports
PPP

Procedures and
Trade Facilitation

Customs, payments etc.:


Simplification & automation
Harmonization & standardization
Modernization & governance of border agencies

Services

Forwarders, truckers, brokers etc.


Regulation of entry
Market structure and competition
Competence and quality of service

Sustainable
Logistics

Green Logistics
City Logistics
Food security

Regulations (customs, services) are increasingly


regional (e.g. EU), but implementation national.
World Bank LPI, Transport Business Summit 2014, Brussels

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How the World Bank supports countries


in Logistics policy-making

World Bank LPI, Transport Business Summit 2014, Brussels

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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
World Bank LPI, Transport Business Summit 2014, Brussels

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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

Concept: Exploit synergies between institutional


reforms and infrastructure investment.
World Bank LPI, Transport Business Summit 2014, Brussels

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World Banks 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.

2.

Aggregated trade costs by countries


Air Connectivity Index (with FAA and IATA)
World Bank LPI, Transport Business Summit 2014, Brussels

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Thank you!

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