The Importance and Determinants of Logistics Performance of Selected Countries

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THE IMPORTANCE AND DETERMINANTS OF LOGISTICS PERFORMANCE OF

SELECTED COUNTRIES
Article · January 2014
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Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB)
An Online International Monthly Journal (ISSN: 2306-367X)
2014 Vol: 3 Issue 6
The Importance and Determinants of Logistics Performance of

Selected Countries
Birol ERKAN,
Kilis 7 Aralık University,
Faculty of Economics and Business Administration,
Kilis, Turkey.
E-mail: birolerkan@kilis.edu.tr
_____________________________________________________________________
Abstract
Logistics can be described as having the right type of product or service at the right place, at
the right time and in the right condition. The global logistics industry has grown significantly
while logistics has become an important part of the business economic system and major
global economic activity in recent years. Logistic activities accelerate economic growth and
productivity growth. Efficient logistics is an important determinant of a country’s
competitiveness and source of employment. This study is carried out by 2014 data from 113
countries and it is determined that the effect of sub-components (infrastructure-weighted) of
the Global Competitiveness Index to the Logistics Performance Index is by using regression
analysis. Results obtained from the regression analysis demonstrate the level of quality of
railroad infrastructure and port infrastructure, which are major determinants of logistics
performances of the countries. In this context, if a country wants to increase her logistics
performance, she should improve the quality of railroad and port infrastructure primarily.
___________________________________________________________________________
Key words: Logistics, Logistics Performance Index (LPI), Global Competitiveness Index
(GCI), Infrastructure
Jel Classification: L91, L92, N70
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1. Introduction
Foreign trade, especially export is quite important to increase a country’s economic
growth rate. Moreover, export plays a key role for the countries to receive a greater share of
the global market. Satisfactory and sustainability levels of countries’ export depend on
exporting high value-added products and increasing the diversity of products and markets.
Meanwhile, foreign trade transactions exhibit a complex view and has enhanced the
importance of logistics. Logistics is a critical component of relevant across agriculture,
manufacturing and service sectors and has to be optimally managed for smooth functioning of
production and distribution operations. Additionaly, logistics cost accounts for a major
component of the input cost in all sectors. By doing so, countries have been forced to develop
and integrate with logistics strategies to policies and strategies in question.It is understood
and exhibited more clearly by those countries that are capable to take the lead over
competitors with adjustments to be made on logistics activities and comprehensive logistics
strategies.
In this humble work, firstly, logistics performance will be discussed from a conceptual
and historical framework. Secondly, components and process of logistics, the economic
impacts of logistics activities, the importance of logistics in the economic development of the
countries and logistic performance index are described in the data set and the methods form
the part of the study. Lastly, it is aimed to reveal the relationship between the Logistics
Performance Index (LPI) and some of the components (infrastructure-weighted) of the Global
Competitiveness Index (GCI) related to the countries, and the linear regression analysis will
be applied by using IBM SPSS Statistics 20.
2. Literature Review
In the study performed by Mohan in 2013, it was showed that the logistics management
has effect on global competitiveness. Furthermore, the paper also examined the salient
features of Indian logistics systems. Indian companies need to opt for 4PL services, should
bring in savings through usage of high technology tools, systems and collaborations. Finally,
the logistics service provider should bring down the logistics cost to clients, while
concurrently improving the service standart (Mohan 2013).
E.Sandberg and M.Abrahamsson explore how to generate sustaniable competitive
advantage in the best two Swedish practice-companies that successfully exploit logistics as a
source of competitive advantage. By using a theoretical framework based on the resource
results from review of a firm, the research elaborates the link between operational and
dynamic logistics capabilities and sustainable competitive advantage. The study identified the
five dynamic capabilities, namely managerial knowledge and presence, cross-functional
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teamwork, control, learning and supply chain relationships. Those all are vital for the
continuous development of the bundling of logistics process and Information Technology (IT)
systems. (Sandberg &Abrahamson 2011).
J.Tongzon examines the determinants of competitiveness in logistics and identified the
key factors that are required for a successful a logistics hub. For the logistics hub, the analysis
on the determinants of competitiveness is made using Singapore as a case study before
drawing some implications for the countries in the Southeast Asian region. The customers of
logistics services do pay more attention to operation efficiency when selecting the services.
Logistics operators in the service industry, should well understand the requirement of their
customers and make efforts to meet and possibly exceed their expectations (Tongzon 2004).
R. Founou developed a framework for analyzing the contribution of IT in the logistics
sector. The paper concluded that IT would contribute to competitive advantage in limited
cases and that most often the strategic necessity hypothesis would apply. The paper suggests a
dual approach to information technology strategic management: first, the firm should develop
the capacity to efficiently implement some standart solutions on an opportunity-based
approach; second, it should embed its IT system in the organization with a strong top
management commitment and a clear strategic alignment. To creat a competitive edge,
logistics IT applications were predominantly outsourced (Founou2002).
J. Roy compared Canada’s logistics and supply chain management performance, both in
terms of international trade and from the perspective of inovative practices adopted by
Canadian companies in the domestic market. The study also compared the performance of
Canadian and American companies on the basis of logistics costs. Despite recent efforts by
the Industries in Canada to understand and support Canada’s logistics sector, much remains to
be done in terms of assessing and understanding the performance level of Canadian
companies regarding supply chain management (Roy n.d.).
To conclude, it has been seen in the research literature that logistics-related studies are
related to logistics management and information technology in general. Literature review also
shows that there is not a single research on the relationship between Global Competitiveness
Index and the Logistics Performance Index. Thus, this study is expected to be a crucial
contributor to the literature.
3. The Conceptual Framework
Logistics is, by definition, a functional system which consists in combining and
coordinating the operations of different modes of transport as a fundamental pre-requisite for
ensuring efficient service (Leal 2012). In other words, logistics is defined as a business
planning framework for the management of material, service, information and capital flows. It
includes the increasing complex information, communication and control systems required in
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today’s business environment. It is also defined as the procurement, maintenance,

distribution, and replavement of personel and material. A typical logistics framework consists
of physcial supply, internal operations and physical distribution of goods and services (NSDC
2010). At the same time, logistics can be defined as having the right type of product or service
at the right place, at the right time and in the right condition (bestlogisticsguide n.d.).
However, our expectations for a firm or company are directly related to logistics. The
customer expectations define the purpose of a logistics system -it ensures that the right goods,
in the right quantities, in the right condition, are delivered to the right place, at the right time,
for the right cost. In logistics, these are called as the six rights (USAID 2011).
4. Historical Development of Logistics
The etymology of the world “logistics” is often thought to be related to armed forces,
which uses the term to describe all tasks related to troop support. However, the origins of
logistics run back much deeper into the past (DHL 2008). Logistics has been playing a
fundamental role in global development for almost 5.000 years now. Since the construction of
the pyramids in ancient Egypt, logistics has made remarkable strides. Time and again,
brilliant logistics solutions have formed the basis for the transition to a new historical and
economic area. Examples of this fundamental progress include the invention of the sea-cargo
container and the creation of novel service systems during the 20th century. Both are integral
parts of globalization today (DHL 2008).
During the Second World War (1939-1945), logistics had evolved greatly. The army
logistics of United States and counterparts proved they can do more than what the German
army could handle. The supply locations for German armed forces were inflicted with serious
damages and Germany was not able to wreak the same havoc on its enemy. The United States
military ensured that the services and supplies were provided at the right time and at the right
place. It also tried to provide these services whenever and whereever required, in the most
optimal and economical manner. The best available options were developed to do the task.
This also gave birth to several military logistics techniques which are still in use in a more
advanced form (bestlogisticsguide n.d.).
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Table 1:Historical Developments of Logistics

PERIOD EVENT
Around 2700 B.C. Material handling technology in pyramid
construction. Blocks of Stone weighing
several tons were transported and
assembled at the construction site.
Around 300 B.C. Revolutionary Greek rowing vessels-the

new foundation of intercontinental trade.
Around A.D. 700 Procurement logistics in the construction

of the Mezquita Mosque-pillars came to
Spain from all parts of the Islamic empire.
Around 1200 The international network known as the

Hanseatic League-cooperation for
transport bundling and international sea
transport.
Around 1500 Progressive postal service in Europe-the

first time-definite mail shipping service.
Around 1800 Discovery of new road conveyances and

the railroad-expansion of logistics tasks
through new Technologies and means of
transport.
Around 1940 Military logistics during the world wars-

transfer of military logistics concepts to
the business world.
1956 Invention of the sea container-structural

evolution of world trade and the boom of
international flows of goods.
Around 1970-1980 Kanban and just-in-time (JIT)-logistics

concepts with a special emphasis on
procurement.
Around 1990 Ouick response (QR) and efficient

consumer response (ECR) technologies-
logistics concepts with a special emphasis
on distribution.
Today Supply chain management-a look at the

entire logistics chain from the vendor’s
supplier to the end customer.
Today Advancing globalization-efficient

logistics as a competitive edge in the era
of globalization.
Source: (DHL 2008)
Today, logistics is an important part of the business economic system and major global
economic activity. The logistics cost are estimated to be between 9-20 % of the GDP. The
logistics costs as a percentage of GDP for some countries are given below (Mohan 2013):
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Table 2: Logistics Cost-GDP Ratio

COUNTRY LOGISTICS COST/GDP (%)
US 7.8
Europe 10.0
China 18.0
Japan 11.4
India 13.0
Source: (Mohan 2013)
The global logistics industry has registered significant growth in the last decade wherein
the big driver has been the emergence on Third Party Logistics (3PL) and Fourth Party
Logistics (4PL) players in the industry who are expected to play much more important role in
the years to come.
The global logistics industry is characterised by high costs of operations, low margins,
shortage of talent, infrastructural bottlenecks alongside increasing demand from clients for
providing one-stop solutions to all their needs and for investing in progressive technology. All
these factors further decreases the margins involved in this industry and fastens the process of
consolidation in the indusry through acquisitions, mergers and alliances (NSDC 2010).
5. Components and Processes of Logistics
Logistics is not confined to manufacturing operations alone. It is relevant to enterprises,
including government, institutions such as hospitals and schools, and service organizations
such as retailers, banks, and financial service organizations. Examples from these sectors will
be used throughout some main books of the field to illustrate the relevance of logistics
principles to a variety of operations.
Some of the many activities encompassed under the logistics umbrella are given in Figure
1, which illustrates that logistics is dependent upon natural, human, financial, and information
resources of inputs. Suppliers provide raw materials which logistics manage in the form of
raw materials, in process inventory and finished goods. The outputs of the logistics system are
competitive advantage, time and place utility, efficient movement to the customer, and
providing a logistics service mix such that logistics becomes a proprietary asset of the
organization (Lambert, Stock& Ellram 1998).
The fundamental goal of international logistics are processing, warehousing and transport
(Vallee& Dircksen 2011). However, the value chain for logistics as follows (NSDC 2010):
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Fig 1: Components of Logistics Management
Management actions
Planning Implementation Control
Outputs of
Inputs into logistics
Logistics
Marketing
Natural
orientation
resources
(competitive
(land,
advantage)
facilities and
equipment) Logistic Management Time and
Suppliers Raw In-process Finished Customers place utility
Human
resources materials inventory goods
Efficient
Financial movement to
resources customer
Information Proprietary
resources asset
Logistics activities
 Customer service  Plant and warehouse site
 Demand forecasting selection
 Distribution communications  Procurement
 Inventory control  Packaging
 Material handling  Return goods handling
 Order processing  Salvage and scrap disposal
 Parts and service support  Traffic and transportation
 Warehousing and storage
Source: (Lambert, Stock & Ellram 1998).

Goods that are received from the manufacturers are loaded and stuffed into containers of
right size. The goods are then transported by the appropriate mode of transportation (land
transport, transport via pipelines, water transport, and air transport) (The Economist 2012).
The transported goods are brought to a warehouse and stored safely. Wharehousing requires
planning of resources, assets, processes, and accurate demand forecasting supported by
scalable infrastructure to be profitable (KPMG 2009). The goods are then re-packed in the
format suitable to be sent to the customer, and then finally delivered to the customer (Figure
2).
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Fig 2: Value Chain: Logistics
Transshipment
Packaging Transporting Warehousing Repacking Delivery
 Loading  Road  CWC, SWC  Unloading

Manufacturer Consumer
 Stuffing  Rail  CFS, ICD  De-Stuffing
 clearing  Sea  Logistics  Clearing
 Air Park
 Pipeline
Source: (NSDC 2010).

Logistics is a critical component that is essential and relevant across agriculture,
manufacturing and service sectors and which has to be optimally managed for smooth
functioning of production and distribution operations. Additionaly, logistics cost accounts for
a major component of the input cost in all sectors, more so in the case of sectors such as
cement, steel, automobiles, retail, fast-moving customer goods (FMGC), pharmaceuticals etc.
With rising competition in the sectors that use logistics services, it has become even more
important to enhance the efficiency of the system and use the cost-benefit in increasing the
company’s competitiveness. Besides, with the globalisation enclosure all over the world, a
larger number of multi-national companies (MNCs) are sourcing, manufacturing and
distributing goods on global scale, and thus need more complex supply chains to be managed.
Given such developments, the Transportation, Logistics, Warehousing and Packaging Sector
is expected to become a more specialised and niche expertise area where high premium will
be charged for increased quality and quantity of servics delivered by logistic service provider.
By tracing the flow of a product from the procurement of raw materials through
manufacture of the end product to the customer, one can gain a broad view of logistics
processes. In this context, a distinction can be drawn among the phases of
 Procurement Logistics
 Production Logistics
 Distribution Logistics
 Spare-parts Logistics
 Reverse Logistics
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All types of value chain can be performed in every step of the logistics process. As a
result, there are warehouses both in procurement as well as in production and distribution
(DHL 2008).
6. Layers to Logistics Services
There are five main inter-related layers of logistics services that involve increasing levels
of service and supply chain integration:
6.1 First Party Logistics (1PL)
It concerns beneficial cargo owners who are the shippers (such as a manufacturing firm
delivering to customers) or the consignee (such as a retailer picking up cargo from a supplier).
They dictate the origin (supply) and the destination (demand) of the cargo with
distribution being an entirely internal process assumed by the firm. With globalization and the
related outsourcing and offshoring of manufacturing, distribution services that used to be
assumed internally tend be contracted to external service providers.
6.2 Second Party Logistics (2PL)
It concerns the carriers that provide transport service over a specific segment of a
transport chain. It could involve a maritime shipping company, a rail operator or a trucking
company that are hired to haul cargo from an origin (e.g. a distribution center) to a destination
(e.g. a port terminal).
6.3 Third Party Logistics (3PL)
It concerns freight forwarders that could have stakes in a specific transport segment and
its physical assets, but who offer comprehensive freight distribution services along transport
chains. These services can involve warehousing, transloading, terminal operations and even
forms of light manufacturing such as packaging and labeling (Rodrigue n.d.). A 3PL thus tries
to organize the tasks related to physical distribution, so that parts and finished goods can be
carried from their origin to their destination. It provides multiple logistics services for its
clients and customers (Langley, Allen& Dale 2004).
6.4 Fourth Party Logistics (4PL)
Creates value by redesigning eveything from the business perspevtive to processes as it
manages logistics for carries, forwarders or warehouses (Deloitte 2013). This often involve
agreements (subcontracting) with 3PLs and 2PLs (Rodrigue n.d.). 4PL (also sometimes called
a lead logistics provider) is a non-asset based company (i.e. they don’t own their own trucks
or warehouse facilities) that provide logistics consulting services to fully manage, design, and
build supply chains. While the logistics and supply chain industry continues to be confused
about the exact role and definition of 4PLs, emerging few categories of logistics consulting
and management firms are emerging that are invaluable in managing large scale, complex
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supply chain functions from the top and overseeing innovative technology solutions
(Logistics List 2011).
6.5 Fifth Party Logistics (5PL)
A fifth party logistics provider (5PL) will aggregate the demands of the 3PL and others
into bulk volume for negotiating more favourable rates with airlines and shipping companies.
Non asset based, it will work seamlessly across all disciplines (logisticsmgt 2011). These are
firms who are mainly logistics service providers that plan, organize and implement logistics
solutions on behalf of a contracting party by using the appropriate technologies as needed
(Deloitte2013). Fifth party logistic is often linked to E-business (logisticsglossary n.d.).
7. The Economic Impacts of Logistics Activities
As it is mntioned before, logistics plays a key role in the economy today, and the market
volume of logistics has already reached a substantial level in many economies as a result
(DHL 2008). Economic impacts of logistics can be analyzed as follows:
 Logistic activities accelerates economic growth and productivity growth and decreases
poverty. There is now overwhelming evidence that trade liberalization is associated with
faster productivity growth among the firms of developing countries. It is assumed that
increased trade due to broad-based liberalization can, under the right circumtances,
promote economic and social development through increased productivity and decreased
poverty. In such a case, logistics sector has a crucial role to play in the process (WTO &
OECD 2013).
 Logistics is one of the major expenditures for business, thereby affecting and being
affected by other economic activities.
 Logistics supports the movement and flow of many economic transactions; it is an
important activity in facilitating the sale of virtually all goods and services. To understand
this role from a systems perspective, consider that if goods do not arrive on time,
customers can not buy them. If goods do not arrive in the proper place, or in the proper
condition, no sale can be made. Thus, all economic activity throughout the supply chain
will suffer (Lambertet al. 1998).
 Logistics may be the best source of competitive advantage for a firm because it is less
easily duplicated than other elements of the marketing mix: product, price and promotion.
Consider, for example, forming close, ongoing relationship with carriers or logistics
service providers can help give the firm a distinct competitive advantage in speed to the
customer, reliability, availability, or other customer service factors (Lambertet al. 1998).
 Efficient logistics is an important determinant of a country’s competitiveness as it is for
the firm. The international transport system may suffer from insufficient cross-country
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coordination of the network, such as non-integrated time schedules, customs delays,

incompatible standards, insufficient flow of information about delays. Logistics services
help to solve these problems. For example, they assist clients to save costs by
concentrating cargo flows, reducing the ratio of empty voyages and favouring the sharing
of information across transport operators (WTO 2004).
 Increasing logistics performance deliver the products to markets at competitive quality
and prices (Forrestn.d.).
 Efficient logistics don’t just reduce costs of transport and transit time, but also decrease
the cost of production. If logistics services are inefficient, firms are likely to maintain
higher inventories at each stage of the production chain, requiring additional working
capital (bigger warehouses to store larger inventories) (WTO 2004).
 Greater efficiency logistics means that socially important goods, such as basic foodstuffs,
can be moved within countries more quickly and lower cost.
 Thanks to efficiency logistics, farmers can access entirely new markets, either in different
regions, or, potentially, internationally.
 Logistics is a source of employment. Many of the operations related to logistics are
manpower intensive (KPMG 2009). Logistics operations tend to be relatively more labor
intensive in developing countries than in developed ones, due to differences in production
technology (WTO & OECD 2013).
8. Logistics Performance Index and Its Components
The importance of efficient logistics is now widely accepted by policymakers worldwide.
Trade and commerce are moved within and across borders by private operators. The
efficiency of those supply chain -logistics performance- is what the Logistics Performance
Index (LPI) and its components measure. This performance depends heavily on the policy
environment: measured by individual countries or regional economic groups in infrastructure
provision, regulation and development of services, or facilitation of trade through more
friendly procedures at the border contribute substantially to logistics performance (WTO
2014).
The LPI survey was carried out through The World Bank’s partnership with the
International Association of Freight Forwarders (FIATA), the Global Express Association
(GEA), AND THE Global Facilitation Partnership for Transportation and Trade (GFP) (The
World Bank 2002). The Logistics Performance Index (LPI) analyzes countries in six
components:
 The efficiency of customs and border management clearance.
 The quality of trade and transport infrastructure.
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 The ease of arranging competitively priced shipments.

 The competence and quality of logistics services.
 The ability to track and trace consignments.
 The frequency with which shipments reach consignees within schedule or expected
delivery times.
International LPI based on the assessment of foreign operators located in the country’s
major partners, and weighs the average of the six components above (World Bank 2002).
Fig 3: Input and Outcome LPI Indicators
Customs Timeliness
Supply
Infrastructure chain International
service shipments
delivery
Services Tracking and

quality tracing
Areas for policy Service delivery

regulations performance
(inputs) outcomes
Time, cost,
reliability
Source: (WTO 2012).

The components were chosen based on recent theoretical and empirical research and on
the practical experience of logistics professionals involved in international freight forwarding
(WTO 2012).
LPI survey has been made 4 times so far, in 2007, 2010, 2012 and 2014. Based on a
worldwide survey of global freight forwarders and express carriers, the LPI is a
benchmarking tool developed by the World Bank that measures performance along the
logistics supply chain within a country. Allowing for comparisons across 160 countries, the
index can help countries identify challenges and opportunities and improve their logistics
performance (WTO 2014). The index ranges from 1 to 5, with a higher score representing
beter performance (The World Bank 2014).
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Fig 4: Logistics Performance Drivers
Perfect order Time in

Damage & Lose transit
Lead time
Supply
Chains/
Logistics
Demand
Transportation Cost
Inventory Quality
Lead Time
Source: (Forrestn.d.).
The results of LPI 2014 point to Germany as the best performing country with an LPI
score of 4.12, and Somalia as the worst with 1.77 (on a scale of 1 to 5) (WTO 2014).
Table 3: The Top 10 Performers on the 2014 LPI-Largely Unchanged Since 2007
2014 LPI 2012 LPI 2010 LPI 2007 LPI

Country Rank Score Rank Score Rank Score Rank Score
Germany 1 4.12 4 4.03 1 4.11 3 4.10
Netherlands 2 4.05 5 4.02 4 4.07 2 4.18
Belgium 3 4.04 7 3.98 9 3.94 12 3.89
United Kingdom 4 4.01 10 3.90 8 3.95 9 3.99
Singapore 5 4.00 1 4.13 2 4.09 1 4.19
Sweden 6 3.96 13 3.85 3 4.08 4 4.08
Norway 7 3.96 22 3.68 10 3.93 16 3.81
Luxemburg 8 3.95 15 3.82 5 3.98 23 3.54
United States 9 3.92 9 3.93 15 3.86 14 3.84
Japan 10 3.91 8 3.93 7 3.97 6 4.02
Source: (WTO 2014), (WTO 2007)
As expected, high-income countries dominate the top 10 rankings (Table 3) (WTO 2014).
In fact, the composition of the 10 has remained relatively unchanged since 2007. Not
surprisingly, many of these countries are major and well-established logistics players with a
dominant role in global or regional supply chains.
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9. Data Set and Methods

In the study, it is aimed to find out the relationship between the Logistics Performance
Index (LPI) and some of the components (infrastructure-weighted) of the Global
Competitiveness Index (GCI) related to countries. First of all, data for 113 countries in 2014
was compiled and analyzed.
Table 4: Variables Used in Analysis
Some of the Components of the Global
Logistics Performance Index
Competitiveness Index (GCI)
(Dependent Variable)
(Independent Variable)
LPI Quality of Roads
Quality of Railroad Infrastructure
Quality of Port Infrastructure
Quality of Air Transport Infrastructure
Value Chain Breadth
Company Spending on R&D
Source: (World Bank 2014), (World Economic Forum, 2014)
For this purpose, by using the linear regression analysis, the Logistics Performance Index
was taken as the dependent variable, and the effect of some of the components (infrastructure-
weighted) of the Global Competitiveness Index (GCI) (Table 4) was measured. Analysis was
performed by using IBM SPSS Statistics 20.
Table 5: Model Summary

Model R R Square Adjusted R Std. Error of
Square the Estimate
1 ,865a ,748 ,734 ,27622
a. Predictors: (Constant), Company Spending on R&D, Quality of
Port Infrastructure, Quality of Railroad Infrastructure, Quality of Air
Transport Infrastructure, Quality of Roads, Value Chain Breadth
When examining the results for the model (Table 5), it is expressed that there is high rate
relationship between Logistics Performance Index (LPI) and some of the components
(infrastructure-weighted) of the Global Competitiveness Index (GCI). However, it is said that
the model is descriptive (R2=0,748).
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Table 6: Anova
Model Sum of df Mean F Sig.
Squares Square
Regression 24,003 6 4,000 52,432 ,000b
1 Residual 8,088 106 ,076
Total 32,090 112
a. Dependent Variable: LPI
b. Predictors: (Constant), Company Spending on R&D, Quality of Port Infrastructure, Quality
of Railroad Infrastructure, Quality of Air Transport Infrastructure, Quality of Roads, Value
Chain Breadth
When examining the results for Anova (Table 6), it is seen that the model is significant as
a whole. Indeed, p < 0,05, F= 52,432.
Table 7: Coefficientsa
Model Unstandardized Standardized t Sig.
Coefficients Coefficients
B Std. Error Beta
(Constant) 1,166 ,147 7,945 ,000
Quality of Roads ,005 ,045 ,012 ,114 ,909
Quality of Railroad
,103 ,032 ,271 3,257 ,002
Infrastructure
Quality of Port
,105 ,050 ,216 2,098 ,038
Infrastructure
1
Quality of Air
Transport ,076 ,052 ,153 1,465 ,146
Infrastructure
Value Chain Breadth ,117 ,078 ,175 1,494 ,138
Company Spending on
,087 ,067 ,144 1,297 ,197
R&D
a. Dependent Variable: LPI
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It is seen that quality of railroad infrastructure and quality of port infrastructure are major
determinants of logistics performances of countries when examining the effect of some of the
components (infrastructure-weighted) of the Global Competitiveness Index (GCI) to the
Logistics Performance Index (LPI) related to 113 countriessince p<0,05 (Table 06) and the
cofficient values are positive for both variables. In this context, if the country wants to
increase logistics performance, she should improve the quality of railroad and port
infrastructure primarily.
10. Conclusions and Recommendations
Today, in the arena of global trade where price competition alone does not make any
sense and production costs converges together, the importance of logistics services and
strategies has gained equal importance. Countries that move from transportation to logistics
are getting a greater share of the international market. It is understood more clearly by the
countries that take the lead over competitors with regulations made on logistics activities and
comprehensive logistics strategies.
When countries increase their investment on logistics research and give more importance
to their logistics, economic development will also be anticipated. Indeed, in the face of the
increase in logistics performance of a country, economic growth, employment level and
productivity will increase, poverty will decrease. Moreover, as logistics supports the
movement and flow of many economic transactions, all economic activities throughout the
supply chain will be influenced by these effects. After all, due to the logistics activities,
country's comparative advantage will increase since efficient logistics will reduce costs of
transport, and decrease the cost of production.
The efficiency of logistics activities are what the Logistics Performance Index (LPI) and
its components measure. This efficiency primarily depends on the quality and competence of
customs and border management, trade and transport infrastructure and logistics services. In
this paper, it is worked on the effect of various technical and physical infrastructure indicators
in the Global Competitiveness Report (GCI) to the LPI and it is concluded that the logistics
performance would primarily depend on the quality of railroad and port infrastructure. In this
regard, countries that develops railway infrastructure and enhances the quality of ports
ensures competitiveness and eventually reach the top positions in the Logistics Performance
Index.
1252
2014 Vol: 3 Issue 6
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1254
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THE IMPORTANCE AND DETERMINANTS OF LOGISTICS PERFORMANCE OF

Article · January 2014

Competitiveness, International Economics, International Trade View project

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The Importance and Determinants of Logistics Performance of

today’s business environment. It is also defined as the procurement, maintenance,

Table 1:Historical Developments of Logistics

Around 300 B.C. Revolutionary Greek rowing vessels-the

Around A.D. 700 Procurement logistics in the construction

Around 1200 The international network known as the

Around 1500 Progressive postal service in Europe-the

Around 1800 Discovery of new road conveyances and

Around 1940 Military logistics during the world wars-

1956 Invention of the sea container-structural

Around 1970-1980 Kanban and just-in-time (JIT)-logistics

Around 1990 Ouick response (QR) and efficient

Today Supply chain management-a look at the

Today Advancing globalization-efficient

Source: (DHL 2008)

Table 2: Logistics Cost-GDP Ratio

Fig 1: Components of Logistics Management

Source: (Lambert, Stock & Ellram 1998).

Fig 2: Value Chain: Logistics

Packaging Transporting Warehousing Repacking Delivery

 Loading  Road  CWC, SWC  Unloading

Source: (NSDC 2010).

coordination of the network, such as non-integrated time schedules, customs delays,

 The ease of arranging competitively priced shipments.

Fig 3: Input and Outcome LPI Indicators

Services Tracking and

Areas for policy Service delivery

Source: (WTO 2012).

Fig 4: Logistics Performance Drivers

Perfect order Time in

2014 LPI 2012 LPI 2010 LPI 2007 LPI

9. Data Set and Methods

Source: (World Bank 2014), (World Economic Forum, 2014)

Table 5: Model Summary

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