responding to global logistics trends with a national logistics...

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Responding to global logistics trendswith a National Logistics Strategy

Bangkok, January 2007

Paul Amos, Transport AdvisorWorld Bank, Washington DC

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Contents

I. What is logistics?

II. What are the global trends?

III. Why have a National Logistics Strategy?

IV. What should be its aims?

V. What should be its scope?

VI. Logistics in Thailand-key challenges.

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Contents

I. What is logistics?II. What are the global trends?

III. Why have National Logistics Strategy?



VI. Logistics in Thailand-key challenges.

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Supportservices

Equip. hire/leasingEquip. maintenanceSanitary servicesSecurity servicesTrade insurance &

finance

Core logistics services

Line-haul transportPickup/distributionStorageLoading/unloadingStuffing/strippingLoad consolidation

Value adding services

PackagingQuality controlProduct testing/repairAssemblyInstallationInformationInventory control

Freight logistics involves many different physical and economic activities…


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Not surprisingly, logistics comprise a significant proportion of GDP

Country

GDP in US$m Logistics in US$m % of GDP

Mexico 334,726 49,753 14.9 Ireland 67,392 9,611 14.2 Singapore 94,063 13,074 13.9 Hong Kong 153,068 20,992 13.7 Germany 2,352,472 306,264 13.0 Taiwan 273,440 35,686 13.0 Denmark 174,237 22,440 12.8 Portugal 101,182 12,871 12.7 Canada 585,105 70,191 12.0 Japan 4,599,706 522,982 11.3 Netherlands 392,550 44,495 11.3 Italy 1,214,272 137,027 11.2 UK 1,151,348 122,344 10.6 US 7,576,100 795,265 10.5

Source: Transport & Logistics in the Internet Age: International Summit 2001


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…..and a substantial proportion of product prices

FoodChemical

MetalPaper

TextileElectrical

Automotive

AVERAGE

0% 5% 10% 15% 20% 25% 30% 35%Logistics Costs in Relation to Annual TurnoverSource: European Logistics Association

I. What is logistics

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Direct transport costs are around 25% of logistics costs

TRANSPORT

39%OUTBOUND

26%INTERNAL

35%INBOUND

Storage20%

Storage25%

11%Management

& Control

18%Administration

10%Packaging

16%InventoryFinancing

Source: OECD Average: Bundesvereinigung Logistik (Germany)


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Contents


II. What are the global trends?III. Why have National Logistics Strategy?



VI. Logistics in Thailand - key challenges.

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The world’s logistics industry is experiencing great change…II. What are the global trends?

Technology

Expectations

Markets

All modes of transport are investing to obtain more efficient, usually larger vessels/vehicles and improved traffic dispatching, monitoring and control capability

Global competition in product and service markets is driving higher standards and lower costs in logistics supplier markets

Rapid expansion of international trade in most regions, and particularly in Asia: many supply chains are now truly global

CompetitionDespite some industry concentration (eg ports) the freeing of transport markets is creating greater contestability in logistics services and sub-markets

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…...other changesII. What are the global trends?

Security

Bottlenecks

Energy

Higher standards of security in freight transport are being sought in all modes, but particularly in international shipping and aviation

Logistics services depend heavily on public infrastructure in roads, railways, ports, airports, shipping channels etc: capacity increments are not matching world freight volume growth

The expectation of perpetually cheap energy is waning due both to declining fossils fuel stocks and expectation of higher energy taxes in response to global warming

Inter-modalityBoth standard and specialized containerization continues to grow , facilitating inter-modal transit and multi-modal allocation of traffic

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Market perceptions: East Asia logistics costs are generally comparable with OECD

0

10

20

30

40

50

60

E. Asia-Pacific

Europe-C Asia

HighIncomeOECD

Overall costsPorts/airportsRailRoad FCL


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Market perceptions: East Asia logistics have much greater service problems than OECD

05

10152025303540

E. Asia-Pacific

Europe-C Asia

HighIncomeOECD

Delays due tocompulsorywarehousingDelays due topre-shipmentinspectionCriminalactivities

Bribes


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Market perceptions: that the low quality of infrastructure in east Asia is a problem

05

101520253035404550

E. Asia-Pacific

Europe-C Asia

HighIncomeOECD

fixed transportinfrastructure

telecommsinfrastructureand services


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Market perceptions: the performance deficit OECD vs. E Asia is increasing

0

10

20

30

40

50

60

70

East AsiaPacific

Europe/C.Asia

HighIncomeOECD

ImprovingcustomsclearanceImprovingregulatoryregimeImprovinggovernance


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Contents



III.Why have National Logistics Strategy?IV. What should be its aims?



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III Why have a National Logistics Strategy?

Why have a National Logistics Strategy?

1. The industry is of national importance to trade& development

3. The industry depends on public infrastructure for its success

4. Government policy and admin. responsibilities are fragmented

5. The private sector is also very diverse, with conflicting interests

2. The external impacts are significant incl. transport safety, emissions etc.

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Energy efficiency and greenhouse gases

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What should National Logistics Strategy try to achieve?

••Customer responsiveness Customer responsiveness ••Geographic coverageGeographic coverage••Delivery timeDelivery time••Reliability of delivery timeReliability of delivery time••Frequency of deliveryFrequency of delivery••Safety and security of goodsSafety and security of goods••Protection of corporate imageProtection of corporate image••ValueValue--adding servicesadding services

••Transport & storage tariffsTransport & storage tariffs••Inventory holding costsInventory holding costs••Product damage or deteriorationProduct damage or deterioration••Pilferage lossesPilferage losses••Insurance costsInsurance costs••AdministrationAdministration••Customs and other clearancesCustoms and other clearances••Bribes and malicious delaysBribes and malicious delays••Social & environmental costsSocial & environmental costs

Higher customer service

Lower service cost

IV. National Logistics Strategy: key aims

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High service at low cost requires the 3C’s

Capital accessCapital accessInvestment in physical assets that deliver demanding service standards

Investment in IT to monitor and control operations

Investment in physical assets that deliver demanding service standards

Investment in IT to monitor and control operations

Commercial cultureCommercial cultureClose attention to costs in a ‘tough’industry

High levels of staff and management incentives

Close attention to costs in a ‘tough’industry

High levels of staff and management incentives

Logistics strategy should encourage private enterprise and competition

Logistics strategy should encourage private enterprise and competition

A focus on customer service

High-order marketing skills

Management agility

A focus on customer service

High-order marketing skills

Management agility

Competitive spiritCompetitive spirit

IV. Logistics strategy: key aims

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Contents





V. What should be its scope?VI. Logistics in Thailand - key challenges.

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III National Logistics Strategy – scope?

What should be in a National Logistics Strategy?

1. Logistics policy principles

4. Stakeholder participation process

5. Public infrastructure framework

6. Monitoring and review mechanism

3. Legal and regulatory changes

2. Audit of current performance

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1.Logistics

policy principles

Public policy objectives

Roles of markets and of regulations

Roles of central and local governments

Principles of industry access/licensing

Roles of public and private sectors


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2.Audit of current

performance

Problems and bottlenecks

Benchmarking of cost performance

Benchmarking government functions (for example, customs performance)

Research into customer perceptions

Benchmarking of service performance


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3. Legal and regulatory changes

New legislation/regulations if necessary

Changes to administrative structures to implement logistics strategy

Amendments to existing legislation or regulations

May involve trade,

transport, economic,

and/or environmental

legislation and

regulations


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4.Stakeholder

participation process

Local government authorities

Private suppliers of logistics services

Public infrastructure suppliers

Gvt. services suppliers (e.g. customs)

Customers of transport & logistics

Key policy departmentsTrade, transport, tourism etc


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5.Public

infrastructure framework

Land-use planning (e.g. for transport corridors or logistics centers)

Access rights to public infrastructure

Pricing and cost recovery policies

Public infra. investment priorities

Finance and management


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6.Monitoring and review mechanism

Measurable objectives

Clear responsibility and accountability

Public transparency and reporting

Periodic updating

Timetable and milestones


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Contents






VI.Logistics in Thailand - key challenges.

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Thailand – total and manufacturing exports 1990-2004 (USD mills)

0

20000

40000

60000

80000

100000

120000

1990 2004

Total exportsManuf. exports

VI Logistics in Thailand – key challenges

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Thailand - non manufacturing exports 1990-2004 USD mills

0

2000

4000

6000

8000

10000

12000

14000

1990 2004

FoodAgricultureTransportTravel/tourismIT etc


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Thailand – total and manufacturing imports 1990-2004 (USD mills)

0

20000

40000

60000

80000

100000

120000

1990 2004

Total importsManuf. Imports


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Thailand - non manufacturing imports 1990-2004 USD mills

0

2000

4000

6000

8000

10000

12000

1990 2004

FoodAgricultureFuelsOres and metalsTransportTravel/tourismIT etc


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Key Challenges

1. Build on SuccessThe Thai Logistics Industry has enabled trade growth of 340% in 14 years and manufacturing trade growth of 370%.

The industry has performed well...identify the success factors and hold onto and strengthen them.

Identify impediments to continuing success…and address them


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Key Challenges

2. Look to the futureThai manufacturing will become more sophisticated to serve more demanding international markets

International amenity services can grow alongside travel, tourism and IT industries especially in Gulf region

Logistics services need to be world class for Thailand to win international competitions in goods and amenity services


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Key Challenges

3. Match strategy to marketsThe Thai logistics sector has many and diverse suppliers, services and customers, and is always changing

Government departments cannot and should not try to micro-manage the logistics sector

Strategy should aim to remove the economic, administrative and infrastructure barriers that prevent logistics markets from working.


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Tools and Knowledge Resources from the World Bank

Global Facilitation Partnership for Transportation and Trade (GFP)

GFP aims at pulling together all interested parties, public and private, national and international, who want to help achieve significant improvements in transport and trade facilitation in Bank member countries

Trade and Transport Facilitation: A Toolkit for Audit, Analysis and Remedial Action

Logistics Perception Indicators: being developed and aiming to measure global connections

Business Climate Surveys

World Bank Port Reform Toolkit (updated, 2007)


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Thank you for your attention

Questions and comments to:[email protected] or [email protected]

The findings, interpretations and conclusions expressed herein are those of the author and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent


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