logistics performance thailand
TRANSCRIPT
Logistics Performance Measurement in Thailand
Ruth Banomyong (PhD)
Centre for Logistics Research
Thammasat University
Agenda 1. Introduction
2. Research Objectives
3. Literature Review
4. Logistics Performance Measurement Framework
5. Thailand’s Logistics Performance Results
6. Comparing against the WB’s Logistics
Performance Index
7. Summary The author would like to acknowledge the presentation done by Ojala &
Lorrentz on May 12, 2011 entitled “Towards an improved methodology in
logistics cost and performance measurement through the LPIO network” in the literature review
Introduction • Since 2001, Thailand has recognised
logistics development as a national
priority.
• A national logistics development policy
has been approved for the period 2006-
2010.
• The NESDB is currently reviewing the
existing plan and is developing the new plan for the next 5 years.
1.5
7.3
7.2
16%
(2005) 13%
(2010)
1
6
6
5 4 3 2 1
To establish a world-class logistics system to support Thailand as Indochina’s trade and investment center
Vision
Objective
1. Aim at the world-class technology and skills.
2. Focus primarily on strategic industries.
3. Any change management must be customer oriented.
Implementation
Principles
Strategic Agenda
Business Logistics
Improvement
New Trade Lanes and Logistics Network
Optimization
Logistics Service Internationalizati
on
Trade Facilitation Enhancement
Capacity Building
1 To enhance trade facilitation with an aim to increase cost efficiency and customer responsiveness of businesses, and also reliability and security of their logistics process)
2 To create economic value from the logistics and other supporting industries
Thailand Logistics Development Strategy (2006-2010)
• The Thai Ministry of Industry is responsible for
the strategic agenda on “Business Logistics
Improvement”.
• The logistics bureau at the Department of
Primary Industries and Mines at the Thai
Ministry of Industry has the mission to support
and develop industrial logistic system in
Thailand.
• In collaboration with Thammasat University, a
study was conducted to assess logistics performance of Thai firms in 2010.
Introduction
1. To Develop an Assessment Framework for
Firms’ Logistics Performance
2. To assess industries based on the ISIC code
3. To establish a logistics performance database
4. To disseminate logistics performance scores to
stakeholders
5. To improve Thailand’s logistics performance based on benchmarking methodology
Research Objectives
Literature Review:
Logistics concepts are not statistical units
• Firm level (survey) data vs. macro level statistics
• Linkage to National Accounts data only implicit
• Self-reported costs often subjective
– Aggregation may also lead to ”double counting”
– One respondent from a very large firm often misleading
– SME data important to get a balanced picture
In short: severe knowledge gaps exist especially
on the concept of logistics costs
Main types of logistics study/survey
• Statistics-based studies applying models
– Econometric
– Other modelling approaches
• Case study-based approaches
• Surveys using questionnaires
– Comprehensive themes
– Single-theme surveys
However, severe knowledge gaps on
logistics performance indicators & costs
• Lack of uniform methods & terminology
• Very few cross-country studies made, thus
little comparative data exists across
– Countries
– Industries
• Comparisons across studies problematic
Examples of statistics-based logistics studies
• Annual State of Logistics Report U.S 1989
• Bowersox, Rodrigues, Calantone & Closs, Stank 1999, 2002, 2005
• South Africa State of Logistics Survey 2003
• Svensk Makrologistik (Sweden) 2008
• Radelet and Sachs 1998
• Lee & Hausmann (World Bank background note) 2005
World Bank case studies on national
logistics costs in Low-Income countries
• Arvis: Sub-Saharan and North Africa 2003
• Ojala: Moldova, Albania, Ukraine, Central Asia 2003
• Naula: Central Asia 2007
Examples of surveys using questionnaires
• ELA & A.T. Kearney 1987 5
• Master of Logistics 1990 10+
• Finland State of Logistics 1991 6
• German Logistics Association BVL 1995 10+
• State of Logistics: The Canadian Report 200X 3-4
• Norwegian Logistics barometer 2003 4
• SCI Logistics barometer Germany 2000s 3+
• ASLOG L'Etat de l'art de la logistique française 2005/2006 2+
• McKinsey Global Supply Chains 2006 & 2008 2
• LogOn Baltic Logistics Survey 2007 1
• World Bank Logistics Performance Index 2007 2
• Swiss Logistics market, St. Gallen University 2009 3
Logistics is an important source of competitive advantage for large and medium-sized manufacturing and trading firms
0 % 20 % 40 % 60 % 80 % 100 %
Top management priority
Source of competitive advantage
Impact on profitability
Customer service level
Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree
Logistics has an impact on…
Logistics is …
Logistics has an impact on…
Logistics is …
n=329; Finland State of Logistics 2009, available at: www.mintc.fi
How high are logistics costs for
manufacturing and trading firms?
Reviewing some recent survey results:
• No universal definition exists on firm or
macro levels, therefore conceptions
inevitable vary
• Translation and educational issues are
also prevalent in cross-cultural studies
Logistics cost indicators in the Baltic Sea Region in
2007, % of sales, N = 574
Source: Ojala et al.; LogOn Baltic Master Report 3:2007, www.logonbaltic.info
Manufacturing Wholesale & retail trade
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2006 2008
7.5% 6.8% 6.9%
3.6% 3.7% 3.5%
0.6% 0.6% 0.7% 0.4% 0.4% 0.4%
Administrativo
Armazenagem
Estoque
Transporte
11.5% 11.6% 12.1%
Source:
ILOS Institute
Logistics Costs as a % of GDP in Brazil
Administration
Warehousing
Inventory
Transportation
…but using costs as % of product value
provides a very different picture
Logistics Costs as Percentage of
Product Value, 2004
Based on Guasch and Kogan (2006) ; graph from Guerrero et al. 2010
The challenges of measuring logistics
performance on a national level:
Scarce empirical evidence
No generally followed methods
No uniform terminology
Limited or no comparability!!!
“Logistics Management is that part of Supply
Chain Management that plans, implements, and
controls the efficient, effective forward and
reverse flow and storage of goods, services and
related information between the point of origin
and the point of consumption in order to meet
customers' requirements. ”
Council of Supply Chain Management Professional(2004)
Logistics Management Defined
20
Key Logistics Activities
• Logistics communication & order processing
• Customer service & support
• Demand forecasting & planning
• Purchasing & Procurement
• Material handling & packaging
• Inventory Management
• Transportation
• Facilities site selection, warehousing & storage
• Return goods handling and reverse logistics
Source: Grant et al., 2006
Cost
dimension
Time
dimension
Reliability
dimension
9 Logistic
activities
27 KPIs
Conceptual Framework
Logistic activities Cost Time Reliability
Customer service and
support
Ratio of customer service
cost per sale
Average order cycle time DIFOT
Purchasing and
procurement
Ratio of procurement cost
per sale
Average procurement cycle
time
Supplier In Full and
On-Time Rate
Information Processing Ratio of information
processing cost per
sale
Average order processing
cycle time
Order Accuracy Rate
Transportation Ratio of transportation
cost per sale
Average delivery cycle time DIFOT
Warehousing and site
selection
Ratio of warehousing cost
per sale
Average inventory cycle time Inventory Accuracy
Demand planning and
forecasting
Ratio of forecasting cost
per sale
Average forecast period Forecast Accuracy Rate
Inventory management Ratio of inventory
carrying cost per sale
Average inventory day Inventory Out of Stock
Rate
Material handling and
packaging
Ratio of value damaged
per sale
Average material handling
and packaging
Damage Rate
Reversed Logistics Ratio of returned goods
value per sale
Average cycle time for
customer return
Rate of Return Goods
KPI logistics assessment framework
KPI Assessment Framework • However, not all KPIs are of equal importance.
• 9 key KPIs can reflect overall logistics
performance
Cost Time Reliability
Transport Order Cycle Time
Delivery in Full & on Time
Warehouse Delivery Cycle Time
Forecast Accuracy
Inventory Inventory days Return Rate
Industry No. of company
Foods 48
Textiles 40
Electrical & Electronics 40
Automotives 32
Plastics 40
Total 200
THAILAND’s Logistics Performance Results
Selected Samples from 5 industries: Only best-in-class are
chosen
200 Samples
THAILAND’s Logistics Performance Results
Industry comparison
1. Cost dimension
Foods Textiles EE Auto Plastic
Admin cost 0.6% 0.6% 0.7% 0.8% 0.8%
Trans cost 3.6% 3.6% 1.0% 5.6% 4.8%
WH cost 1.7% 1.2% 0.9% 1.4% 1.3%
Inv cost 0.7% 1.2% 4.6% 0.7% 1.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Logistics cost per Sales ratio
THAILAND’s Logistics Performance Results
2. Time dimension
- 5
10 15 20 25 30 35 40
Average Order Cycle Time(Day)
Average Delivery Cycle Time(Day)
Average Inventory Day (Day)
Foods 11 2 40
Textile 4 1 27
EE 6 2 27
Auto 29 1 26
Plastic 4 2 15
THAILAND’s Logistics Performance Results
3. Reliability dimension
78%80%82%84%86%88%90%92%94%
DIFOT Forecast accuracyFoods 91% 86%
Textile 88% 85%
EE 92% 87%
Auto 89% 86%
Plastic 89% 94%
THAILAND’s Logistics Performance Results
3. Reliability dimension
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
Return rate
4.00%
2.13% 2.04%2.26%
1.93%
Foods Textile EE Auto Plastic
THAILAND’s Logistics Performance Results
A proposed Composite Performance Index Cost Time Reliability
Total Score Inv. cost WH cost
Trans cost
Average Order Cycle Time
Average Delivery
Cycle Time
Average Inventory
Day DIFOT
Forecast Accuracy
Returned Rate
Food
Median 0.73% 1.73% 3.56% 11.00 2.10 39.50 91.15% 86.00% 4.00%
3.066
Scale 4 3 3 3 3 3 3 3 3 3.11 Textile Median 1.23% 1.23% 3.61% 4.44 1.29 27.00 88.00% 84.50% 2.13%
Scale 4 3 3 3 3 3 3 3 3 3.11 EE
Median 4.60% 0.94% 1.03% 6.44 1.67 26.50 91.50% 86.50% 2.04%
Scale 3 4 3 3 3 3 3 3 3 3.11 Auto Median 0.67% 1.41% 5.56% 28.50 1.23 26.00 88.50% 85.50% 2.26%
Scale 3 3 3 3 3 3 3 3 3 3.00 Plastic
Median 1.87% 1.26% 4.84% 3.98 2.10 15.00 88.50% 94.00% 1.93%
Scale 3 3 3 3 3 3 3 3 3 3.00
Note:
• Different time period so comparison not adequate
• Thailand’s own volatile internal political situation
must have increased negative perceptions (i.e. Yellow vs. Red)
Thailand (LPI) 2007 2010
Score 3.31 3.29
Rank 31 35
Comparing against the WB’s LPI
Comparing against the WB’s LP
• A follow up was conducted based on WB’s
LPI survey.
• The idea was to explore how Thai
manufacturers perceived logistics
performance in Thailand.
• The same 200 respondents provided the answers.
33
Comparing against the WB’s LP
34
200 Samples: 3.45 (26th)
Comparing against the WB’s LP
Some observations…
• Perception is derived from manufacturers
not from external service providers
• In-depth understanding of the Thai context
• Infrastructure, Customs, Logistics Quality
and Compliance seems less problematic
• Similarities for timeliness, track & trace
2010 Indicators Score
World Bank LPI 3.29
200 Thai companies (perceptual)
3.45
200 Thai companies (composite index)
3.066
Summary
Future steps
• Weighting of dimensions to improve
composite index
• Expand coverage to 12 industrial sectors
• Sample to cover 500 firms
• Finalise database…
Thank you for your attention
Comments & Questions are welcomed…