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WORLD BANK
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?
IV. What should be its aims?
V. What should be its scope?
VI. Logistics in Thailand-key challenges.
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Supportservices
Equip. hire/leasing
Equip. maintenance
Sanitary services
Security services
Trade 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…
I. What is logistics?
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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
I. What is logistics?
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…..and a substantial proportion of product prices
Food
Chemical
Metal
Paper
Textile
Electrical
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)
I. What is logistics?
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Contents
I. What is logistics?
II. What are the global trends?III. Why have 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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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
Competition
Despite 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 changes
II. 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-modality
Both 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 costs
Ports/airports
Rail
Road FCL
II. What are the global trends?
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Market perceptions: East Asia logistics have much greater service problems than OECD
0
5
10
15
20
25
30
35
40
E. Asia-Pacific
Europe-C Asia
HighIncomeOECD
Delays due tocompulsorywarehousing
Delays due topre-shipmentinspection
Criminalactivities
Bribes
II. What are the global trends?
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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
II. What are the global trends?
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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
Improvingcustomsclearance
Improvingregulatoryregime
Improvinggovernance
II. What are the global trends?
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Contents
I. What is logistics?
II. What are the global trends?
III.Why have 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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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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Contents
I. What is logistics?
II. What are the global trends?
III. Why have 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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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•Value-adding servicesValue-adding 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 access
Investment 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 culture
Close 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
I. What is logistics?
II. What are the global trends?
III. Why have 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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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
III National Logistics Strategy – scope?
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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
III National Logistics Strategy – scope?
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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
III National Logistics Strategy – scope?
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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
III National Logistics Strategy – scope?
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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
III National Logistics Strategy – scope?
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6.
Monitoring and review mechanism
Measurable objectives
Clear responsibility and accountability
Public transparency and reporting
Periodic updating
Timetable and milestones
III National Logistics Strategy – scope?
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Contents
I. What is logistics?
II. What are the global trends?
III. Why have 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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Thailand – total and manufacturing exports 1990-2004 (USD mills)
0
20000
40000
60000
80000
100000
120000
1990 2004
Total exports
Manuf. 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
Food
Agriculture
Transport
Travel/tourism
IT etc
VI Logistics in Thailand – key challenges
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Thailand – total and manufacturing imports 1990-2004 (USD mills)
0
20000
40000
60000
80000
100000
120000
1990 2004
Total imports
Manuf. Imports
VI Logistics in Thailand – key challenges
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Thailand - non manufacturing imports 1990-2004 USD mills
0
2000
4000
6000
8000
10000
12000
1990 2004
Food
Agriculture
Fuels
Ores and metals
Transport
Travel/tourism
IT etc
VI Logistics in Thailand – key challenges
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Key Challenges
1. Build on Success
The 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
VI Logistics in Thailand – key challenges
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Key Challenges
2. Look to the future
Thai 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
VI Logistics in Thailand – key challenges
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Key Challenges
3. Match strategy to markets
The 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.
VI Logistics in Thailand – key challenges
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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
VI Logistics in Thailand – key challenges