The World Bank LPI (Logistics Performance Index) 2010 has just been released. This snapshot of selected performance indicators in nearly 130 countries demonstrates clearly the correlation between logistics performance and sustainable economic growth. This year, the analysis of this bi-annual Report has been expanded to include information on the time, cost and reliability of supply chains. Detailing several major advances since 2007 in places like Brasil, Columbia and Tunisia the report highlights clear potential for low and middle income countries to boost trade performance by 15% through faster, cheaper and more reliable trade logistics – if the analysis is acted upon. Here, we build from the LPI 2010 Report to explore potential to develop a Transformational Logistics perspective to sharpen the analysis of logistics relevant to the emerging and developing world.

The missing link?

 

 

History is written by the winners and, similarly, many Retail and Logistics textbooks are written from the perspective of developed economies and, as the LPI highlights, key segments of the global logistics industry are dominated by no more than 25 large corporations – especially in the maritime, port and air freight segments. This contrasts starkly with the fact that 85% of jobs in the USA and 65% in the EU are generated by small to medium sized companies and in the majority world – that is 75% of world population – few jobs are even formal or covered by regulatory and welfare schemes. Few workplaces are even covered by legal title and health and safety is a pipedream. Conventional Logistics analysis just does not grasp the essential asymmetrical (informal / formal) nature of global sourcing, value addition, distribution and points of purchase. We see Transformational Logistics (and retail) being a better way to describe reality in the emerging and developing world. (more…)

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“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 warehouses 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?

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How many measures do you need?

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McKinsey have published an important insight into increasing the energy efficiency of supply chains. Starting from the fact that 15 million barrels of oil per day – that’s 20% of total production – is used to move things around globally, the study highlights six levers that can make significant impacts on energy efficiency. See: McKinsey (August 2009).

The levers work within three oil price scenarios and focus supply chain set up (from increasing value densities; reducing transport distances and switching modes) to the transport assets themselves (improve design and technology; maximise usage and improve infrastructure).

The levers are well documented. However, several issues remain untouched and the report would be improved by considering: (more…)

Years ago I ordered a dish of Norweigan wild salmon from the menu of a swish Restaurant in London. The plate arrived and my friend, a keen angler, examined the fish and called for the waiter. “Has this salmon ever seen an open river?” He asked. “If it had, it would have twisted and turned and the bones would not be so close together. Give us the price for the bottom-of-the-pool cousin!”

My angling friend was absolutely right. The Restaurant was using notions of a wild habitat to increase perceptions of value and, to up the price when, in fact, the fish had been farmed in no more than the calm waters of a mass production tank near Swindon. CSR or Corporate Social Responsibility may well be suffering from the same fate as it has become the latest Corporate fad to convey notions of being in tune with the social and environmental issues as a way to protect – and sometimes grow – bottom line margin.

How can we ensure that CSR means more than the blurb in a glitzy Annual Report? (more…)

WDR 2009 – Reshaping Economic Geography – highlights that whilst Global Economic Growth will be unbalanced; development can still be inclusive. The Report focusses three key urban development issues density, distance and division and demonstrates how these spatial dimensions play a crucial role in the transformation of economic, social and environmental outcomes. Cities will not develop in an orderly fashion and, as the Report points out,

” informal communities will emerge and expand as the rising demand of workers and firms outstrips the capacity of governments to institute well functioning land markets and to invest in infrastructure and accomodation”

We must not ignore a parallel need to develop rural connectivity to local, national and global markets or, we will trigger an even faster migration to the Cities and exacerbate already significant congestion. One thing is for sure, as Professor Martha Chen and others have pointed out many times elsewhere, the informal economy is not going away. So, what are we going to do about infrastructure, logistics and the informal economy?

This Report supports the urgent need to develop innovative models that explore synergies between the informal and formal sectors and the transformative role of logistics plays a huge part in its conclusions. (more…)

Sixty years after the United Nations signed the Declaration of Human Rights, meetings were held in Paris during December 2008 between UN officials and Business Leaders to explore ways to widen the scope of the Human Rights agenda.

In an interview with France 24 Mary Robinson, former President of Ireland (1990-97); former UN High Commissioner for Human Rights (1997-2002) and now leader of the Realizing Rights Group focussed on ethical globalisation initiatives, spoke of broadening the Human Rights agenda to include fair trade; the plight of children in the workplace; the empowerment of women in political and business circles and above all Action Against Poverty. Logistics and the Supply Chain figure in each of these issues.

Celebrating the fact that over 230 companies worldwide have become involved in this initiative, Mary Robinson said: “I am encouraged to see more and more companies taking a public stand on human rights. This is yet another sign that human rights are becoming part of the mainstream business agenda.” (more…)

We have touched on the MDGs and asked the question whether enough is done to integrate Logistics into the effort. The World Bank’s Logistics Performance Index has many of the answers and the LPI framework is a clear indication that improving logistics performance has become an important development policy objective and, the LPI is providing a valuable benchmark from which priorities can be agreed and delivered upon. See: Connecting to Compete: Trade Logistics in the Global Economy (2007). (more…)