“How long is a piece of string?” I asked a physicist. Suddenly, the concept of measurement triggered mention of a ratio of quantities; quantum’s collapse of the wave function; fractals, lasers and elusive accuracy. We settled on what mattered most. The same goes for Logistics in Developing and Emerging countries. Any notion of measuring better, cheaper and faster logistics as we do in the settled and developed world can dissolve in a monsoon, fall apart at a corrupt border crossing or, lose vital freshness in endless traffic jams and warehouses unfit for purpose. Welcome to logistics reality in a globalised marketplace. The question is – are we measuring the right things on the ground in developing and emerging markets and, what are we doing about what this tells us to transform logistics capacity?
As Danny Leipziger, World Bank Vice President for Poverty Reduction and Economic Management has said, ”Being able to connect to global markets is fast becoming a key aspect of a country’s capacity to compete, grow, attract investment, create jobs and reduce poverty”. For those unable to connect, the costs of exclusion are large and growing and this fact makes logistics key to the transformation of the quality of life. For example, the fact that the cost of Logistics can be anywhere from 13 to 20% in one country and 8% in another can make or break a whole industry sector or, even an economy. We need to understand what happens now; how can it be improved and, how will we know when it has? Back to measuring the piece of string.
Elsewhere on this Blog, we covered The World Bank’s Logistics Performance Index . The latest version seems to be for 2007 based on a 2006 survey. I am curious as to the latest numbers (is there a more up-to-date version) but, more interested in what is measured. Interms of logistics; what matters most is all about measures that have relevance, can be calculated accurately and, sourced simply. Have a look at the LPI and then, consider the following:
1. Relevance. Look carefully at the criteria. On the surface of it, they cover the parameters of end-to-end logistics activity comprehensively. I think they are more like the curates egg – good in parts. Look again. Clearly, many of these criteria can be answered by companies working in the Logistics industry but, is the sample robust enough to give an accurate picture from cow to consumer; bee to bottle or loom to room? Do these criteria reflect the asymetrical nature of many supply chains, like textiles, with one end in the High Street of a formal market and the other in a field or a cottage not even owned by the person making the product, component or material. What measures matter?
At another level, do the criteria reflect emerging priorities. For example, where is reference to increasingly significant environmental issues and, the drive for a green and sustainable supply chain? How can this be measured? And then, what about security?
Security raises all sorts of questions. What drives the monitoring of security? Is it business continuity or, is it vigilance. I had a fascinating discussion with someone in the auto components industry who lamented the fact that his client’s assembly lines had been starved of stock because of a sudden panic on immigration numbers. These matters need closer inspection. Is the technology in place to accelerate the process?
Let’s not forget food security and the need to monitor condition along the supply chain. I will never forget looking at a pallet of dairy products at the back door of a supermarket in the early hours of the morning in a Dublin suburb with the dogs, ehm, interupting the integrity of the chill chain. Condition monitoring (temperature, humidity and air quality) is even more critical for the $49 billion global cut flower and foliage industry.
Then, in a world fast moving from 6 billion to 9 billion people with more than 70% of them living in roughly 50 City Regions – what are the logistics and connectivity criteria that need to be tracked under such conditions? My point here is that statistics based on the nation state tend to aggregate in an unhelpful way. take a look at those fascinating views of earth at nightime. You will see flows of activity – logistics activity – but, you will not see the borders! We must be careful to measure what matters most and from this make decisions that transcend national boundaries. This is especially important when we use the data to support decisions to invest in infrastructure!
2. Accuracy: If the sample does not extend beyond formal relationships within the supply chain – many outsourced partners outsource again to tier 2; tier 3; tier n suppliers all from the informal sector – how can the picture be complete? What happens to the accuracy of any data under these real life conditions. Can technology help? For example, the use of the mobile phone to track and trace.
3. Sourcing the data: Infrastructure – in many places in the developing and emerging world the numbers run out of road; terrestrial telephony or internet connectivity. Customs – how things pass through borders is a key question. Talk to a truck driver in India and listen to tales of border crossings betwee States within India. Another criteria: Logistics competencies – is this based on perceptions of what logistics has to be about? High tech and state-of-the-art facilities. Do we factor in simply- modal criteria that better reflect the realities of developing and emerging economies? For example, bamboo bikes and better tracks for smaller vehicles – this will improve connectivity in many places where trucks will do no more than dig riverbeds for monsoons. And simply-modal criteria could play a key role in the logistics carbon footprint.
Aside of the LPI, we have the MDGs – but they do not have nearly enough on Logistics. Given that logistics and an ability to connect and deliver have an increasingly signficant bearing on delivering the MDGs on time and in full; this needs looking at. In particular, the cost associated with hedging against uncertainty and corruption along the supply chain is so high in some cases that a drive to improve transparency and reliability is increasingly crucial. See: Connecting to Compete: Trade Logistics in the Global Economy (2007). Also, the UPS Business Monitor.
Maybe the real inspiration for Logistics measures should come from thinking on the triple bottom line and, criteria such as economic, social and environmental concerns. Go further and shift from KPI (Key Performance Indicators) to KVIs (Key VALUE Indicators) as a means to highlight the drive to inclusive value chains and what that takes. And this takes us elsewhere. For example, Human Rights and the Ethical Supply Chain. If we are not careful we could use the LPI to measure improvement in, say, the Ghana Oil industry overt he next few years. At one level we may see improvement but, will this reflect a more holistic vision – connectivity of remote rural areas with local and global markets or, set the agenda for minerals other than oil and diamonds. In fact, what price progress on a more balanced set of industries such as honey, carpets and dairy?
4. Compliance. Catch 22. You set up the right measures and then, compliance fails. I know of a company that installed a sophisticated RFID system to track beer barrels in the EU. Then, steel demand in China triggered a frenzy to round up scrap metal – like beer barrels. The company had overlooked the need to firm up compliance with an incentive or a sanction. In this case a deposit payable on return.
5. Using the data. To paraphrase Marx – many people philosophise about the data. The point is to do something with it. And the T L point is that there is much to do with the flows that cross over from the formal to the informal economies; from the developed to the emerging and developing economies. This is the stuff of inclusive globalisation – improving the physical; information and cash flows for the benefit of … people. And what do they think about the quality of life that Logistics delivers?
We must not lose sight of the fact that we take data and measure things to support decisions and change behaviours. And the nature of decisions is changing and, some behaviour needs to be challenged more urgently than we think.
Einstein once said that it was a sign of insanity to do the same thing and expect a different result. The same goes for Logistics. We can’t expect to do what is relevant to the developed world in the context of emerging and developing economies and expect those markets to respond in different ways. An understanding of what is relevant to Logistics relevant to these markets is needed and, efforts to set up simple measures that can be sourced easily and used to transform the scene is long overdue. Maybe a T L perspective can help to develop the criteria.
Note: I am prompted to ask the question because the Post featuring the World Bank Logistics Performance Index previously entered has triggered well over a 1000 hits! So, somebody must want to know how to measure Logistics somewhere. Since they do, I wanted to set the record straight and ask about the criteria.
And yes, it would be useful to see the latest version. Can anyone give the update?