Logistics Costs and Competitiveness
Read this article. The document examines issues and costs related to domestic and international logistics. Sections 3 and 4 are most applicable here. What are the unique challenges facing domestic and global logistics?
Conclusion
This paper has explored a number of different data sources and methodologies
in an effort to move forward on the analysis of logistics costs from a trade
policy research perspective. In the future, it will be important to distinguish
between data collection efforts that are industry-driven - such as estimates of
total logistics costs in GDP - and those that are research-driven. The former
are useful in establishing the size of the sector and in attracting attention from
researchers and policy analysts. However, the results presented here suggest
that they may be of limited use from a trade research point of view. The reason
is that measures of sector size exhibit little systematic relationship with
economic outputs and inputs in a cross-country regression framework.
Moreover, the relationship between sector size and performance appears to be
non-monotonic, which makes it difficult to draw meaningful policy conclusions
based on size alone. By contrast, performance measures such as prices
generally display a more significant relationship with important economic
variables.
The work presented here has three important implications for future research
and data collection work in this area. First, the data and analysis presented
here has relied on descriptive statistical techniques only. There is clearly major
scope to exploit data sources such as national accounts, input-output tables,
and firm-level data within the framework of a fully-specific regression
problem. Such an approach could properly account for intervening causes, and
establish more robust results than those presented here. In tandem with future
data collection efforts, it will be important to make better use of existing data
sources too.
Second, it is important that future data collection efforts emphasize
performance measures rather than size measures. Data on logistics
expenditures is important in either case, but the choice of denominator is
crucial in terms of making the resulting data most useful for applied trade
policy researchers. Ideally, logistics costs should be converted into an ad
valorem equivalent - i.e., a percent of the landed price of 45 traded goods -
which is the measure trade economists most commonly work with in their
models. Alternatively, "pure" performance measures like the LPI can also be
used to estimate ad valorem equivalents by applying the Novy
methodology.
Third, measures of logistics intensity should also be part of the data and
analysis framework moving forward. Some existing work has already focused on logistics costs as a percentage of total costs, which is essentially a measure
of intensity. Moving further in this direction will help fuel research that
identifies sectors in particular countries that are most sensitive to
improvements in logistics performance, and which therefore will tend to
expand relative to other sectors in the face of logistics sector reforms. From a
policy and political economy point of view, it will be important to identify such
sectors and make them aware of the potential role logistics can play in
facilitating their growth.