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March 27, 2014
Dr. Jean-Franois ArvisSenior Economist, The World Bank
Prof. Lauri Ojala
University of Turku, Finland
CONNECTING TO COMPETEThe 2014 Logistics Performance Index
Transport Business Summit 2014
Brussels
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Outline
1. Why care about logistics?
2. What is the Logistics Performance Index?
3. LPI 2014 Results
4. Key messages
5. The LPIs role in the policy dialogue
6. How the World Bank supports countries in
logistics pollicy-making
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Why care about logistics?
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4
50%
70%
90%
110%130%
150%
170%
190%
210%230%
250%
2 2,5 3 3,5 4 4,5
LPI score (2010)
Country trade costs of goods value vs. LPI score
Why Logistics Matters
Supply chain bottlenecks are the primary cause of
friction in trade (trade costs). Reducing them by half
would raise trade by 15% and production by 5% globally.
World Bank LPI, Transport Business Summit 2014, Brussels
A
veragetradecostsofgoodsv
alue
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Logistics Performance and Connectivity
Elasticity of trade costs
0 0,1 0,2 0,3 0,4 0,5 0,6
Distance
Common Border
Common LanguageSame RTA
Tariffs
Shipping Connectivity
Air Connectivity
Logistics Performance
Cost of Starting Business
Exchange Rate
Domestic
Costs
Bilateral
Costs
Source: World Bank, Trade Costs in the Developing World 2013. (RTA = Regional Trade Agreement)5
Besides distance, connectivity and logistics performance
matter more than other trade barriers in boosting trade.
Geography and
(most of) shipping
connectivity are
out of a countrys
control, but policydecisions are not.
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Logistics costs impact productivity
Reliability is often more important than freight costsLogistics costs increase with decreasing logistics performance. Most of this increase
comes from lower reliability and the need to increase inventory (other costs).
6
Firm-level logistics expenditures as % of sales in 2011-2012
Sources: Authors, for Germany: TU Berlin, for Brazil: ILOS, for Finland: Turku School of Economics
7%
7%
5%
5%
13%
9%
7%
4%
0% 5% 10% 15% 20%
Kazakhstan
Estonia
Finland
GermanyTransport cost
Other logistics costs
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What is the
LogisticsPerformance
Index
(LPI)?
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Point of OriginSellers Factory
Alongside
VesselDelivery
to Dock
Exporting Country
Delivered to
Buyers
WarehouseFrontier/
Border
Supply Chain Framework & the sixLPIdimensions
Unloaded
on Dock
Importing Country
Customs
Infrastructure
Services
Quality
Timeliness
International
shipments
Tracking and Tracing
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LPI outline
Built on > 5,000 country assessmentsby over 1,000 freight forwarders &
logistics professionals worldwide
Survey in cooperation with partners
Respondents rate logistics performance
of own country and 8 other countries on
a scale of 1 to 5
Coverage: 160 countries in LPI 2014
Published every 2 years
LPI editions: 2007, 2010, 2012 & 2014
Partnerships
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What do we measure?
Heres a sample question of the Domestic LPI:
Source: LPI 2013/2014 Survey
10
The LPI survey is based on expert
assessments of logistics professionals
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LPI 2014 Results
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LPI data and report at: lpi.worldbank.org
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Good News: All countries performing better
13
With the right
investment and
policies, lower income
countries can also behigh performers.
30
40
50
60
70
80
90
Bottomquintile
Fourthquintile
Third quintile Secondquintile
Top quintile
Percentageofh
ighestLPIscore
2014 2012 2010 2007
Countries inbottom quintile
saw the largest
improvements
(2007-2014).
LPI score as percentage of highest LPI score by LPI quintile;
2007, 2010, 2012 and 2014World Bank LPI, Transport Business Summit 2014, Brussels
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Income level helps little without aligned policies
Count ries by LPI 2014 overall sco re and GDP/capita
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LPI 2014: Top 10 European performers
15
1
2
3
4
6
8
11
13
17
18
4,1
4,0
4,0
4,0
4,0
3,9
3,9
3,8
3,8
3,7
0 5 10 15 20
Germany
Netherlands
Belgium
United Kingdom
Sweden
Luxembourg
Ireland
France
Denmark
Spain
LPI rank LPI score
World Bank LPI, Transport Business Summit 2014, Brussels
LPI 2014 rank out of 160 economies
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LPI is a surveyscores are Confidence Intervals
16
2,5
2,7
2,9
3,1
3,3
3,5
3,7
3,9
4,1
4,3
4,5
DEU
NLD
BEL
GBR
SWE
LUX
IRL
FRA
DNK
ESP
ITA
AUT
FIN
PRT
POL
CZE
HUN
LVA
SVN
EST
ROM
SVK
GRC
LTU
BGR
MLT
HRV
CYP
Score 2014
World Bank LPI, Transport Business Summit 2014, Brussels
EU 28 sorted by LPI 2014 score
LPI score range: 1 = lowest; 5 = highest
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LPI is a surveyscores are Confidence Intervals
17
2,5
2,7
2,9
3,1
3,3
3,5
3,7
3,9
4,1
4,3
4,5
DEU
NLD
BEL
GBR
SWE
LUX
IRL
FRA
DNK
ESP
ITA
AUT
FIN
PRT
POL
CZE
HUN
LVA
SVN
EST
ROM
SVK
GRC
LTU
BGR
MLT
HRV
CYP
Score 2014
Score 2012
World Bank LPI, Transport Business Summit 2014, Brussels
EU 28 sorted by LPI 2014 score
LPI score range: 1 = lowest; 5 = highest
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LPI is a surveyscores are Confidence Intervals
18
2,5
2,7
2,9
3,1
3,3
3,5
3,7
3,9
4,1
4,3
4,5
DEU
NLD
BEL
GBR
SWE
LUX
IRL
FRA
DNK
ESP
ITA
AUT
FIN
PRT
POL
CZE
HUN
LVA
SVN
EST
ROM
SVK
GRC
LTU
BGR
MLT
HRV
CYP
Score 2014
Lower bound 2014
Upper bound 2014
World Bank LPI, Transport Business Summit 2014, Brussels
EU 28 sorted by LPI 2014 score
LPI score range: 1 = lowest; 5 = highest
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LPI is a surveyscores are Confidence Intervals
19
2,5
2,7
2,9
3,1
3,3
3,5
3,7
3,9
4,1
4,3
4,5
DEU
NLD
BEL
GBR
SWE
LUX
IRL
FRA
DNK
ESP
ITA
AUT
FIN
PRT
POL
CZE
HUN
LVA
SVN
EST
ROM
SVK
GRC
LTU
BGR
MLT
HRV
CYP
Score 2014
Score 2012
Lower bound 2014
Upper bound 2014
World Bank LPI, Transport Business Summit 2014, Brussels
EU 28 sorted by LPI 2014 score
LPI score range: 1 = lowest; 5 = highest
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LPI is a surveyscores are Confidence Intervals
20
2,5
2,7
2,9
3,1
3,3
3,5
3,7
3,9
4,1
4,3
4,5
DEU
NLD
BEL
GBR
SWE
LUX
IRL
FRA
DNK
ESP
ITA
AUT
FIN
PRT
POL
CZE
HUN
LVA
SVN
EST
ROM
SVK
GRC
LTU
BGR
MLT
HRV
CYP
Score 2014
Score 2012
Score 2007-2014
Lower bound 2014
Upper bound 2014
EU 28 sorted by LPI 2014 score
World Bank LPI, Transport Business Summit 2014, BrusselsLPI score range: 1 = lowest; 5 = highest
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Aggregated data for 2007-2014 less volatile
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0
10
20
30
40
50
60
70
80
DEU
NLD
BEL
GBR
SWE
LUX
DNK
FRA
FIN
IRL
AUT
ESP
ITA
PRT
POL
CZE
HUN
SVN
LVA
SVK
EST
ROM
BGR
LTU
GRC
CYP
MLT
HRV
Rank 2014 out of 160
Rank 2012 out of 155
Weighted rank 2007-2014 out of 166
EU 28 sorted by weighted*
LPI 2007-2014 rank
*) Weights: 2014 = 53.3%; 2012 = 26.7%; 2010 = 13.3%; 2007 = 6.7 %
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LPI 2014: Top 10 performers by income group
22
2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2
MalaysiaChina
Turkey
Hungary
South Africa
Thailand
Romania
Panama
Bulgaria
Mexico
Top 10 upper middle-income
2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2
Vietnam
Indonesia
IndiaPhilippines
Ukraine
Egypt, Arab Rep.
El Salvador
Pakistan
Nigeria
Guatemala
Top 10 lower middle-income2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2
Malawi
Kenya
RwandaCambodia
Burkina Faso
Liberia
Ethiopia
Nepal
Burundi
Bangladesh
Top 10 low-income
2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2
GermanyNetherlands
Belgium
United Kingdom
Singapore
Sweden
Norway
Luxembourg
United States
Japan
Top 10 overall By overall LPI score
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Key messages
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Key messages from the LPI 2014
The gapbetween the best and worst logistics performers isslowly narrowing, confirming trends from LPI 2007-2012 reports.
Although a country's level of development plays an important role
in its logistics performance, policies do matter. Over-performing
countries such as Indonesia have carried out targeted reforms toimprove the efficiency of their logistics.
In terms of trade facilitation, customs show a steady improvement
across the board but other border control agencies lag behind.
Weakest link paradigm: The challenge is to get right a number
of reforms in parallel and in several areas. This explains a lot of
churning in scores and rank in the middle of the sample.
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The Services Gap
25
0
2
4
6
8
10
12
Low income Lower middle
income
Upper middle
income
%-changein LPI
componentas measured
againstthe highestperformer,2007-2014
Customs Infrastructure Quality of logistics and services
Supply chain efficiency depends
on the quality of private services
moving the goods.
If logistics service delivery is
poor, even good physical
connectivity is not enough.
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Persistent & large differences in border process efficiency
26
The import lead
time for
port and airport
supply chains ismore than twice
as long in
low-performing
countries as inhigh-performing
ones.
Import lead time in days (port/airport)
by LPI quintile
0
1
2
3
4
5
6
7
Bottomquintile(lowest
performance)
Fourth quintile(low
performance)
Third quintile(average
performance)
Secondquintile (highperformance)
Top quintile(highest
performance)
ImportLeadTime(Days)
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Key LPI messages for different income levels
Key message for low-income countries:
Progress in logistics performance is driven by improvement ininfrastructure and basic border management reforms.
Key message for middle-income countries:
Focus moves from infrastructure and border management to
development of logistics services with growing demand foroutsourced logistics.
In more sophisticated logistics environments, the low hanging
fruits have largely been reaped. The new generation of reforms is
more complex, involves many stakeholders, and takes time.
Key message for high-income countries:
The demand for environmentally friendly logistics services is
growing in advanced economies.
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Looking for environmental logistics solutions
28
0%
5%
10%
15%
20%
25%
30%
35%
40%
Low income Middle Income High income:nonOECD
High income:OECD
2014 2012
The percentage of respondents looking for
environmentally friendly shipping alternatives is
growing, and is the highest in advanced economies.
Percentageofrespondentslookin
gfor
greenship
pinga
lternatives
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The LPIs role in the policy dialogue
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What is the role of the LPI?
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The LPI
Is an overall metric of supply chain efficiency.
Provides information of where a country stands
and a broad indication of problem areas.
Is not a diagnostic tool and needs to be supported
by specific tools designed to perform that function.
The LPI has had a significant impact in raisingawareness and pushing for comprehensive
connectivity and logistics policies, e.g. in
the EU, Kazakhstan, APEC and Indonesia.
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Policies matter to Logistics Performance
Ports
Road/rail corridors
Airports PPP
Infrastructure
Customs, payments etc.:
Simplification & automation
Harmonization & standardization
Modernization & governance of border agencies
Procedures and
Trade Facilitation
Forwarders, truckers, brokers etc.
Regulation of entry
Market structure and competition
Competence and quality of service
Services
Green Logistics
City Logistics
Food securitySustainableLogistics
31
Regulations (customs, services) are increasingly
regional (e.g. EU), but implementation national.
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How the World Bank supports countriesin Logistics policy-making
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World Bank lending projects in logistics
World Bank Group lending in FY 2013 USD 52.6 bn
7-8% of the lending portfolio is logistics-related, e.g. in:
International Trade corridors:
Eastern Europe, Central Asia, Central Africa, India, Nepal, Central
America, East & South Africa
Internal corridors, ports:
Brazil, China, Argentina, Indonesia
Customs & fiscal reforms:
Kazakhstan, Russia, Laos, Philippines, Cambodia
Export development:
Tunisia, Latin America
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World Bank advisory work in logistics
Advisory servicesto national governments and
increasingly to regions, for example, in:
Greece, Eastern Europe, Central Asia
Morocco, Tunisia
Western Africa, East Africa, Zambia, Zimbabwe
Colombia,Argentina, Brazil, Uruguay, Peru, Central America
Indonesia, Vietnam, Philippines, Cambodia, Laos
Increasingly fee for service
34
Concept: Exploit synergies between institutional
reforms and infrastructure investment.
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World Banks related indicators
Doing Business Report Trading across Borders Indicator, a red tape metric
e.g. number of document vs. Supply Chain efficiency
Bilateral Trade Costs Database
Since 2013 with trade divisionof UNESCAP
New cross-country indicators:1. Aggregated trade costs by countries
2. Air Connectivity Index (with FAA and IATA)
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Thank you!
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