The World Bank’s Logistics Performance Index and other measures revisited…

“How long is a piece of string?” I asked a physicist. Suddenly, the concept of measurement triggered mention of a ratio of quantities; quantum’s collapse of the wave function; fractals, lasers and elusive accuracy. We settled on what mattered most. The same goes for Logistics in Developing and Emerging countries. Any notion of measuring better, cheaper and faster logistics as we do in the settled and developed world can dissolve in a monsoon, fall apart at a corrupt border crossing or, lose vital freshness in endless traffic jams and wrehouses unfit for purpose. Welcome to logistics reality in a globalised marketplace. The question is – are we measuring the right things on the ground in developing and emerging markets and, what are we doing about what this tells us to transform logistics capacity?  

As Danny Leipziger, World Bank Vice President for Poverty Reduction and Economic Management has said,  ”Being able to connect to global markets is fast becoming a key aspect of a country’s capacity to compete, grow, attract investment, create jobs and reduce poverty”. For those unable to connect, the costs of exclusion are large and growing and this fact makes logistics key to the transformation of the quality of life. For example, the fact that the cost of Logistics can be anywhere from 13 to 20% in one country and 8% in another can make or break a whole industry sector or, even an economy. We need to understand what happens now; how can it be improved and, how will we know when it has? Back to measuring the piece of string.

Elsewhere on this Blog, we covered The World Bank’s Logistics Performance Index . The latest version seems to be for 2007  based on a 2006 survey. I am curious as to the latest numbers (is there a more up-to-date version) but, more interested in what is measured. Interms of logistics; what matters most is all about measures that have relevance, can be calculated accurately and, sourced simply. Have a look at the LPI and then, consider the following:

1. Relevance. Look carefully at the criteria. On the surface of it, they cover the parameters of end-to-end logistics activity comprehensively. I think they are more like the curates egg – good in parts. Look again. Clearly, many of these criteria can be answered by companies working in the Logistics industry but, is the sample robust enough to give an accurate picture from cow to consumer; bee to bottle or loom to room? Do these criteria reflect the asymetrical nature of many supply chains, like textiles, with one end in the High Street of a formal market and the other in a field or a cottage not even owned by the person making the product, component or material. What measures matter?

How many measures do you need?

 

A taste of honey. Transforming an industry from bee to bottle

Jim Brophy taught me the importance of bees. Each morning, he would look to the hives – he had up to 30 – to check the weather. If the bees were out and about there would be no rain. After a day in the fields at Desart in Kilkenny, he would clean his hands with honey;  use it on scrapes or wounds and, on the press next to busts of Napoleon and Padraig Pearse were his prized moulds made out of polished bees wax. He would give talks about plant pollination and how crucial bees are to the harvest and, I recall the wonder of lifting the lid of the hive to see such industry and organisation. *As we develop T L perspectives on high impact industries for the developing and emerging world capable of delivering sustainable and inclusive growth – honey is worth a closer look.  

A hive of industry

Honey is big business. Global production of over 1250 metric tonnes generates a $1.5 billion market. Prices vary. China produces over 20% of global production at just over $1,000 per tonne. New Zealand honey fetches over $6,000. Ten producing countries generate over 70% of global production and, the demand far outstrips supply in many countries. The US imports 55% of its demand and this is worth $150 million; the UK produces under 10% and Saudi Arabia 2% of their needs. Honey is a massive opportunity for developing countries to grow an added value agricultural industry at relatively low cost. Let’s look at the history and then, reflect on the potential to use honey to transform a market and boost income for the poor.[1]

 

Winning the Lottery. Oil and Ghana’s transformation

This week in the UK, news of a £90 million Lottery win launched a media frenzy and a barrage of questions about what the winners would do with the cash – keep the day job or, go shopping? In 2007, Tullow Oil found a significant oil reserve under the sea off Ghana’s Gold Coast. The IMF estimates that the Jubilee Field will generate $30 billion of revenues by 2030 in a country where 30% of the population are living on less than $1.25 per day. The Lottery advised the UK winners to take an immediate holiday to consider their options. Kofi Annan, a native of Ghana and former UN President, urged Ghana’s Government to ask Norway for advice on what to do about oil. He did not suggest Nigeria.

There's more to oil than oil

Ghana was the first African country granted Independence and, by the Jubilee of 2007 had held 4 (soon to be 5) democratic elections against a backdrop of peace and stability; control of corruption; solid macro economic management; poverty reduction and an effective social contract. The capacity of any government to collect taxes and provide social services sums this stability up: in 1990 Ghana collected 12% of GDP and this had grown to 24% by 2005. Primary school enrollment over the same period grew from 54% to 65%. Will Ghana’s oil have a transformative or, a destructive impact?  The jury is out.

 

Thoughts on ethics and the Supply Chain

Writing on the abolition of the British slave trade in 1807, G.M. Trevelyan, the historian, called it “one of the turning circumstances in the history of the world”. As we look to Logistics to make a more transformative impact on global business practice, we could turn to the campaign waged by William Wilberforce and the Abolitionists for inspiration in the quest for an ethical supply chain. Here, T L explores ideas around an inclusive, sustainable and ethical value chain moving goods from source to the consumer; linking it back to ideas set in train by a four hour speech given in the House of Commons in the momentous year of 1789.

A long and winding road

Globalisation has forced companies to develop better, cheaper and faster routes to market – continuosuly. This has generated huge pressures on companies to shorten lead times; place smaller orders with few longer term commitments and, become footloose in search of  lowest cost operators. We have seen the growth of Corporate power – many of the majors bigger than the countries they source from and, the move to outsource non core operations creates layers of suppliers that  add capacity to Tier 1 but reduce any chance of transparency and challenge ethical consistency.

 

Nature’s pig and inclusive value chains…

Cotton is natures pig. Everything can be used. First off, the fibres. These soft white threads - over 80% of the world’s natural fibres – cover the seeds and are strong enough to deal with our sweat and, be washed and ironed hundreds of times. Even today, when synthetic fibres account for 60% of the market, cotton hangs on to the rest. Then, the seeds themselves. Rich in protein, they become a major part of oil used in foods. Then, what is left over finds itself in soaps or, as feed for cattle. Finally, what is left of the plant itself is used for animals to bed down on or, as kindling for a fire. Cotton planted in April is harvested in October and spun the following Spring. By the time this white gold is processed into fabrics, a full year has passed. Let’s look closer at the logistics dimension and how inclusive value chains can make a difference.

More inclusive blue sky thinking needed ...

Look at the shirt or blouse that you wear and consider the story behind the label and its price. Can you imagine the farmer that seeded the crop and the inputs that were needed to protect this fragile crop? Do we know the impact that pesticides are having on the environment or, what the intense need for water throughout the process – some 2,600 litres are needed per shirt – is doing to water supplies? Are we clear that many farms are forced to use child labour to survive and, that loan sharks are behind much of the cash that finance the crop? There is a catalogue of social consequences that need to be understood and, a lack of transparency throughout the process – often caused by the agents at every step – that makes dealing with the economic, social and environmental challenges so difficult.

 

Port cities and the sustainability challenge

Tonight, Christine Loh – founder and CEO of Hong Kong based Policy Research Group Civic Exchange - gave the annual Peter Thompson lecture at the University of Hull Logistics Institute. The theme was Port cities and, the sustainability challenge. 

Takes your breath away!

Using a Global League Table of the top ten container ports since 1998, Christine Loh highlighted the rise of Shanghai from 3 million to over 28 million teus (containers) by 2008. Other ports came from nowhere to join the elite. Then, showing photographs of the port proximity to living space, Public Health figures were introduced to beg the question – is this growth sustainable?

 

Mind the gap! T L is needed. Now!

Distribution rarely makes an appearance on the main stage of the Globalisation debate. Specialist literature on logistics or supply chain management is confined to the margins and yet, few countries are in a so-called developed state and, the vast majority need a revolution in infrastructure and connectivity to have any chance of transforming their economies to reap the rewards of globalisation or, improve their local realities.

Paul Collier has tracked a number of African countries where natural resources have not generated the desired social dividends and many other commentators highlight countries torn apart by civil war or, natural disasters to be plagued by the dead hand of corruption. And yet, in some Report or, Strategic Plan somewhere visions of a viable market-led economy tied together by logistics languish. Let’s look at the journey that all such countries have to travel. 

All countries torn apart by war and many wrecked by natural disasters turn to military logistics to put them back together. Temporary bridges and makeshift roads are laid to pull together isolated communities and, lay out the network that can allow a second phase Humanitarian logistics effort to work. Now, the work of reaching the needy with food and the sick with medicines can begin. And yet, the next set of images that we see in this narrative is based on a business case from the developed world. It is as if we move from military and humanitarian logistics to a market led solution in one giant leap.  From mayhem to shopping mall is not the logistics next step. Mind the gap.

Without T L there's a clear gap

 

CII Logistics Summit, October 2009, Chennai

In a speech on the Skills Gap and Manpower training at the CII Logistics Summit 2009, Rob Bell spoke of the elephant in the room. He was referring to the tendency to ignore those who live and work in the informal or shadow market when all of the great plans for India are being discussed. All talk of India shining and the demographic dividend must address those at the bottom of the pyramid and, the skills deficit.

Over 350 delegates heard him speak of the skills gap in India. “By 2022, India will need over 500 million skilled workers but, current skills training capacity is no more than an estimated 3 million trainees per year. This is a major skills gap in the Young Republic and a revolution in thinking and practice is needed to close the gap.”

Let's not forget the inclusive value chain

Using examples from all sectors of Indian industry, he highlighted the massive infrastructure and sector based investments that are planned over the next 15 years. From Ports to Warehousing, the Logistics industry is being transformed. However, without the skills to deliver – these plans will stall.

 

The perishable supply chain

Have you ever wondered about how Italian ice cream was invented – before electricity? Or, the significance of eggs at Easter? Ice cream reaches back in time to the Egyptians; the Mughals and 5th century Greeks with their snow mixed with honey and fruit. And hens always laid their eggs from April to June when their body clock said so. For most of recorded history, eggs were a springtime crop and, that’s where it starts.

Where am I going with this? The perishable supply chain combines technology to conquer borders and distance but we need to understand the dislocation involved in local communities and the environment itself. For example, as the Indian middle class grows so too does the demand for quality fruits and vegetables. Recently, in Delhi, I met with a company that is developing an impressive network of orchards up in the foothills of the Himalayas. This will take time so, there are plans to source apples and other quality fruits from … Chile.  

 

Transforming deities …

So there we are in a village in Tamil Nadu when someone asks the question what is logistics? How can it transform our lives? As ever, we search for a bit of local context to make the point …

 

Hinduism has 330 million or so divas (gods); those knowable aspects of the formless phenomenon, Brahma. Some personify natural phenomena, evil forces or even a  disease; some are humans deified and others, the local deities of a town or a village. The gods are many headed , many limbed and often fantastical but despite this superficial polytheism there is an underlying belief in a single deity that drives the rest.

The Gods appear as pairs … [hang in there, we will get to Logistics in a moment] … and the male aspect needs the female, his shakti (consort) to be complete. And each god and goddess has a vahana, a creature considered the vehicle on which they ride.