Upload
marny-cain
View
53
Download
2
Embed Size (px)
DESCRIPTION
Creating Global Value Through Efficient Trade Logistics. Warren H. Hausman Hau L. Lee Uma Subramanian. Motivation for logistics indicators research Survey instrument for logistics indicators Assessment of logistics indicators in different countries - PowerPoint PPT Presentation
Citation preview
Creating Global Value Through Efficient Trade
Logistics
Warren H. Hausman
Hau L. Lee
Uma Subramanian
Overview
• Motivation for logistics indicators research
• Survey instrument for logistics indicators
• Assessment of logistics indicators in different countries
• Logistics indicators as determinants of bilateral trade
• Supply chain-based logistics index
The Growing Global Economy
• Global trade grew 10.2% in 2004; constituting 10% of world’s GDP
• Global economy grew 5% in 2004
• Foreign exchange transactions:$10 billion a day in 1970;$10 billion a second today
• World trade growth has exceeded output growth rate every year since 1950
• 1973-1999: World trade grew at an annual rate nearly three times higher than world GDP
• Trade to GDP Ratio:– U.S.: tripled since 1970– World: doubled since 1970
Source: Gene Long, UPS, 2005
Selling and Sourcing Trends
Revenue Generated Outside Home Market
Sourcing of Raw, Semi-finished and Finished
Goods Outside Home Market
27%
35%
42%
FY02
FY05
FY08
22%
31%
38%
FY02
FY05
FY08
Source: Accenture Global Operations Survey, 2005
Growing Global Market
• Growing global middle class:– 95% of consumers live outside of U.S., 60% in Asia– 52 developing nations with population of
1.5 billion reaching middle class– China middle class at 300 million, with 1% annual growth– India tripled middle class since 1985
• Emergence of BRICs (Brazil, Russia, India, China):– Today their economies constitute 15% of G6.– Economies will be half of G6 by 2025– Economies will surpass G6 in less than 40 years
What Determines Bilateral Trade?
What Determines Bilateral Trade?
Propensity to Import
Propensity to Export
Shipping Cost & Time
Logistics Frictions
Institution QualityInfrastructure
Institution QualityInfrastructure
Past Studies on Bilateral Trade
GDP GDPDistance
Institution QualityInfrastructure
Institution QualityInfrastructure
Our Focus
GDP GDPDistance
Institutional QualityInfrastructure
Institutional QualityInfrastructureLogistics
Frictions
Research Opportunities
• Institutional quality and infrastructure variables have been based on subjective indices or expert assessments.
• Quantifiable and measurable logistics performance indicators have not been used.
• Variables used are not operational, i.e., not directly actionable.
• Best results without using country-specific dummy variables explain 66% of variability in bilateral trade.
Objectives of Research
• Determine the significance of logistics performance in influencing bilateral trade through the use of measurable and quantifiable logistics indicators.
• Perform a critical assessment of logistics performance of countries globally.
• Develop supply-chain logistics index to guide resource allocation and deployment for improving logistics efficiency.
Survey Instrument
2005 Study
• Textiles• Apparel• Coffee, tea,
cocoa, spices
80Countries
Questionnaire Survey
(17 pages)Answers from
Panalpina Experts
Focus on containerized
imports & exports
Follow-up Phone Checks by World Bank
Examples of Logistics Indicators
• Trade procedure
• Customs clearance
• Vessel turnaround
• CSI times• Waiting time
for berth• Container
dwell time
Time
• Port & terminal charges
• Document Processing
• CSI costs• Trade
procedure costs
• Custom clearance incentives
• Inland freight
Cost
• No. of documents per transaction
• % of containers inspected
• Level of inspection
• No. of signatures for customs clearance
Complexity
• No. of containers unloaded per berth hour
• Port shutdown days
• Inland transport speed
• Frequency of vessel calls at port
Efficiency
14
2833
46
36
49
37
49
41
53
4448
58
69
020
4060
Days
OECD EAP LAC MENA SAS ECA AFR
Source: World Bank Global Logistics Indicators Survey, 2005
Average Time for a Typical Import Transaction
Germany
United StatesJapan
New ZealandDominican RepublicPhilippines
FranceChileTurkeySenegal
ArgentinaChinaNepal Nicaragua
Nigeria
ZimbabweMongolia
KazakhstanNiger
Burundi Kyrgyz Republic
050
100
150
Day
s fo
r an
Impo
rt T
rans
actio
n
10 20 30 40GDP per capita (thousands of dollars)
Trade Transactions Processing Time and GDP
Source: World Bank Global Logistics Indicators Survey, 2005
Total Cost for a Typical Import Transaction
501
506
550
700
821
841
1242
1335
1409
1428
1631
1800
2029
22484616 5787
0 1000 2000 3000 4000 5000 6000
Thailand
Norway
Sweden
Spain
Ireland
Malaysia
South Africa
Brazil
India
United States
Korea
China
Kazakhstan
Algeria
Zambia
Cameroon
Source: World Bank Global Logistics Indicators Survey, 2005
US $
Cost for a Typical Import Transaction
983
1120
1130
1277
1370
1677
1983
0 500 1,000 1,500 2,000
US DollarsOECD
MENA
EAP
SAS
ECA
LAC
AFR
73
74
77
104
286
438
0 100 200 300 400
Percent (Cost/Per Capita GDP)
OECD
LAC
MENA
ECA
EAP
SAS
AFR
Source: World Bank Global Logistics Indicators Survey, 2005.
23333
555
677
815
1721
3940
42
0 10 20 30 40
Number of SignaturesSingapore
Finland
France
Indonesia
Korea
Ireland
Italy
United States
Venezuela
China
Colombia
Senegal
Bangladesh
Lao PDR
Mongolia
Nigeria
Azerbaijan
Congo, Dem.Rep.
Number of Signatures for Typical Export Transaction
Source: World Bank Global Logistics Indicators Survey, 2005
42
9
5
13
8
29
16
010
2030
Num
ber
of S
igna
ture
s fo
r Im
port
s
High income Upper middle income Lower middle income Low income
Process Inefficiencies and Wealth
Total For Customs
Source: World Bank Global Logistics Indicators Survey, 2005
Percentage of Import Containers Inspected
0
20
40
60
80
100
Mal
aysi
a
Germ
any
USAJa
pan
South A
frica
Mex
ico
Jord
an
Bangla
desh
Colum
bia
Domin
ican
Rep
.
Turkey
Pakis
tan
Sri Lan
ka
Niger
ia
Source: World Bank Global Logistics Indicators Survey, 2005
11
29
44
69
020
4060
Per
cent
of I
mpo
rt
Con
tain
ers
Insp
ecte
d
High income
Upper middle income
Lower middle income
Low income
Logistics Impediments and Income
Source: World Bank Global Logistics Indicators Survey, 2005
Augmented Gravity Model
Basic Attraction
Logistics Indicators
Institutional Quality
• Exporter GDP• Importer GDP• Distance
Bilateral Trade• Time
• Cost• Variability
• Exporter’s corruption index• Importer’s corruption index• Regional trade agreement dummy
Critical Global Logistics Indicators
Time
Cost
Variability
• Exporter’s average time for all procedures• Importer’s average time for all procedures
• Importer’s total costs for import-related procedures
• Exporter’s Max Time – Average Time for all procedures
• Importer’s Max Time – Average time for all procedures
Augmented Gravity Model Results
Log GDP exporterLog GDP importer
Log distanceLog Exporter’s Avg Time for ProceduresLog Importer’s Avg Time for Procedures
Log of Importer’s Total Cost for ProceduresLog Exporter’s Max Time – Avg TimeLog Importer’s Max Time – Avg TimeExporter’s Corruption Perception IndexImporter’s Corruption Perception Index
Regional Trade Agreement Dummy
Adjusted R-SquaredObservationsF-Statistics
1.2620.940-1.379-0.453-0.072-0.294-0.2640.0330.7490.5930.314
Coefficient
74.3752.63-38.09-6.53-0.94-6.9
-4.780.428.996.184.33
t-Statistic
0.7105149
1263.3
Observations
• Measurable and quantifiable logistics indicators improve explanatory power of gravity model for bilateral trade.
• Logistics indicators results show efficient logistics in time and cost can contribute to increased trade.
• Variability matters – higher variability in processing time can be a deterrent to bilateral trade.
Supply-Chain Based Logistics Index
• A single metric to evaluate and measure logistics efficiencies
• Weights of each variable in the Logistics Index show relative benefits
• Use weights to guide resource allocation and deployment of logistics improvements
• A single measure enables quick and easy benchmarking
Supply Chain-Based Logistics Index
Distance
Total Cost of Processing
Total Time (Freight + Ports)
Shipping Cost
Trade-Related Costs
Inventory cost(In-Transit)
Total Landed
CostCoeff of Var of Total Time
Inventory cost(Safety Stock)
Product Cost
Three-Stage Logistic Index Estimation• Log Exporter GDP• Log Importer GDP• Exporter’s Corruption Perception Index• Importer’s Corruption Perception Index• Regional Trade Agreement Dummy
Stage 1
Stage 2
Bilateral Trade
• Stage 1 variables plus• Logistics IndexStage 3
Bilateral Trade
Residual from Stage 1
• Log Distance• Total Total Processing Cost• Total Time• Coeff of Variation of Total Time
LogisticsIndex
Stage 1 Logistics Index Model Results
Log GDP exporter
Log GDP importer
Exporter’s Corruption Perception Index
Importer’s Corruption Perception Index
Regional Trade Agreement Dummy
Adjusted R-Squared
Observations
F-Statistic
1.200
0.888
0.298
0.252
1.005
Coefficient
61.67
46.04
24.09
17.85
11.5
t-Statistic
0.620
5149
1710.0
Stage 2 Logistics Index Model Results
Log Distance
Log of Total Processing Costs
Total Time (Fright + Ports)
Coeff of Var for Total Time
Adjusted R-Squared
Observations
F-Statistic
-1.282
-0.129
-0.009
-0.874
Coefficient
-34.19
-3.64
-4.9
-4.18
t-Statistic
0.221
5149
376.4
Stage 3 Logistics Index Model Results
Log GDP exporter
Log GDP importer
Exporter’s Corruption Perception Index
Importer’s Corruption Perception Index
Regional Trade Agreement Dummy
Logistics Index
Adjusted R-Squared
Observations
F-Statistic
1.278
0.921
0.244
0.179
0.345
1.077
Coefficient
75.45
55.06
21.87
13.73
4.85
40.37
t-Statistic
0.710
5149
2293.5
Model Comparisons
Number of Variables
Adjusted R-Squared
F-Statistic
11
0.710
1263.3
6
0.710
2293.5
Augmented Gravity Model
Logistics Index Model
Logistics Index Observations
• It is possible to derive a single logistics index that captures all the explanatory power of all the logistics indicators.
• The logistics index is a significant determinant of bilateral trade.
• The logistics index is derived from distance, time, cost and variability measures.
Summary• Logistics indicators are a significant determinant
of bilateral trade.• A single Logistics Index has equal explanatory
power to the set of logistics indicators.• Countries and enterprises should collaborate to
improve logistics performance and reduce logistics friction in order to foster trade.
• The Logistics Index can be used to guide resource allocation and deployment for such improvement projects.