OTGC Global Cargo Delivery

Measurement of National-Level Logistics Costs and Performance

It is necessary to understand logistics performance at the country level in order to

better evaluate and target Trade and Transport Facilitation (TTF) policy efforts over time

and across countries. Lower costs for logistics reduce the cost of delivering products,

thereby encouraging sales, increasing trade, opening new markets and generally

encouraging business. Performance evaluation also helps to improve the efficiency of

supply chains and the functioning of related infrastructures, services, procedures and

regulation.

Logistics plays a vital role in economic systems and in everyday life. Given the

significant cut back in manufacturing and labour costs, reducing logistics costs has

become an increasingly important task for managers. On account of the complex supply

chains and globalization, the cost of logistics operations could comprise as much as half

the value of general commodities. However, technological development offers new costcutting opportunities.

The level of logistics costs is heavily dependent on the industry, but in general tends

to be high in logistics-intensive operations such as food, metal, chemical and paper

Relying partly on findings from national logistics surveys conducted since 1990, the

Finnish Government, for example, has included the goals of improving logistics

competitiveness and reducing the costs in its programme (Finnish Governmental

Programme 2007, 38).

sufficiently standardized, both in the real world and on the scientific front. They also

point to the conspicuous fact that some logistics professionals cannot even name all the

relevant cost components. (Straube & Pfohl 2008, 48-49)

Havenga (2010, 476) also states, given that a more efficient logistics system is the

key to sustainable economic growth, it is a macroeconomic imperative to track the major

cost components.

One choice firms make that significantly affects the perceived cost of logistics is

whether or not to outsource the operations or to keep them in-house. The outsourcing of

logistics functions is becoming increasingly prevalent, the current outsourcing rate of

domestic transportation in Europe, for example, being 85 per cent, whereas for

international transportation and warehousing it is 81 and 71 per cent, respectively.

inventories, warehousing and order processing. The model has fostered the evolution of

research on the measurement of logistics costs, the results of which include Delaney’s

model, which is used in CSCMP’s Annual State of Logistics Reports, and the estimation

method of measuring global logistics costs developed by Bowersox et al. between 1992

and 2003.

customer service (including customer service, parts/service support and return-goods

handling), transport costs and warehousing (including warehousing, storage, plant and

warehouse site selection), inventory-carrying costs (including inventory management,

packaging and reverse logistics), lot-quantity costs (including materials handling and

procurement), and order-processing and information-systems costs (including order

processing, logistics communication, demand forecasting and planning). (Lambert, Grant,

Stock & Ellram 2006, 11-21)

Ayers (2006) ended up with five components: purchased materials and the

associated labour, transportation, warehousing, inventories, and packaging (Ayers 2006,

63). Examples of more detailed cost breakdowns include Bidgoli’s seven components and

Kivinen and Lukka’s 12 (Kivinen & Lukka 2004).

The emphasis going forward should therefore be on compiling data that capture logistics

performance most accurately, rather than sector size.Finally, and finds suggestive evidence that improvements in logistics performance could lead to sectoral reallocations in favour of relatively heavy industries in developing countries, which is consistent with the goal of export diversification.

Performance of Maritime Logistics

Liner shipping and container ports have repeatedly made headline news since 2020 as companies across supply chains were hit with price hikes and shipment delays. Predictability became a thing of the past.