9 April 2023

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Measuring Logistics PerformanceMeasuring Logistics Performance

René Meeuws

Jakarta, May 6 2009

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Logistics costsLogistics costs

Why do we want to know it?

Comparison with other countries? Benchmarking?Monitoring logistics performance and logistics costs in timeImpact assessment policy measures to reduce logistics costs

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Logistics Costs and GDPLogistics Costs and GDP

9%

11%

11%

13%

18%

21%

USA

Japan

EU

India

Thailand

China

Source: The Economist, June 17th 2006 & NESDB

Logistics Cost to GDP in Comparison

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Logistics Costs as % GDP Logistics Costs as % GDP US 1999US 1999

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Logistics Cost as % GDP USLogistics Cost as % GDP US

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Logistics Costs US 2002Logistics Costs US 2002Carrying Costs - $1.444 Trillion all business inventory Billions of Dollars

Interest 23

Taxes, Obsolescence, Depreciation, Insurance 197

Warehousing 78

Transportation Costs

Motor Carriers:

Truck - Intercity 300

Truck - Local 162

Other Carriers:

Railroads 37

Water 27

Oil Pipelines 9

Air 27

Forwarders 9

Shipper Related Costs 6

Logistics Administration 35

Total Logistics Cost 910

CASS Annual State of Logistic Reports (14th edition)

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Logistics Costs % GDP KoreaLogistics Costs % GDP Korea

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Logistics costs as % GDPLogistics costs as % GDPWhat does it say?What does it say?

Not very much…Transit countries where international distribution takes place may have high percentageTrend of smaller shipments and higher frequencies leads to more ton-kmIt calculates volumes to cost; time aspect not taken into accountCareful with comparisons with other countries as data may be collected in a different way

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Logistics Costs as % GDPLogistics Costs as % GDP

Can it be an indicator for logistics performance?Probably not…Would be interesting to compare Logistics Costs as % GDP with LPI – is there a correlation?

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Logistics Costs - LPILogistics Costs - LPI

There is a modest correlation between Logistics Costs as % of GDP and the score of the Logistics Performance Index…

LC % GDP LPIChina 21% 3.32Thailand 18% 3.31India 13% 3.07Japan 11% 4.02USA 9% 3.84Indonesia 3.01R=-0.61233, R²=0.374952

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How to calculate Logistics Costs?How to calculate Logistics Costs?

You need a freight model to calculate ton-km, in particular in road transportYou need to calculate costs of road transport (fuel, drivers, insurance, maintenance, depreciation, overhead costs, etc.); how to rate to cost of fuel?You need to calculate inventory and storage costsYou need to differentiate regionallyYou need to carry out surveysetc.

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Example ArgentineExample Argentine

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Indonesian StrategyIndonesian Strategy

L&R - Laws & Regulations

KCF -Key

CommodityFocus

WWI – What & Where Infrastructure

LSP -LogisticsService

Providers

ICT -Information,

Communication& Technology

HRM -Human

Resources &Management

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Logistics Performance IndicatorsLogistics Performance Indicators

Some indicators can already be considered: o Foreign Direct Investment; increase/decrease in absolute terms; net inflow as % of

GDP. o Trade; import/export/transshipment; increase/decrease in value and volume. o Doing Business: Days to import. o Doing Business: Starting business: Duration in days. o Port clearance: berthing-release; berthing-exit in days. o Rate of physical inspection containers at ports (%). o Dwell time containers in ports: import; export. o Cost of trucking per km; <50 km; >50 km.

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Logistics Performance IndicatorsLogistics Performance Indicators

Relative weight (%) FDI 10 Trade in value/volume 10 Days to import 10 Starting business 10 Port clearance berthing-release; berthing-exit 20 Rate physical inspection 10 Dwell time containers in ports 10 Cost trucking 20 Total 100