Source: adapted from World Bank, Logistics Performance Index. Memedovic, O., L. Ojala, J-P Rodrigue and T. Naula (2008) "Fuelling the Global Value Chains: What Role for Logistics Capabilities?", International Journal of Technological Learning, Innovation and Development, Vol. 1, No. 3, pp. 353-374.

Logistics Performance Index, 2010

The development and provision of advanced logistics services varies from country to country. In most developing countries, the market for these services is small, which can be a major deterrent for companies wishing to establish a market presence. The first worldwide Logistics Performance Index (LPI) was developed to provide a better assessment about how respective countries rank in the managerial and physical effectiveness of their logistic. At the global level, a gradual convergence of the LPI is observed. It is mostly the outcome of the diffusion of transport infrastructures and services, a process favored by the growing presence of global freight carriers, such as maritime shipping companies, global terminal operators, air freight and even third party logistics providers.

The LPI is a composite index based on proxy measures for transport and information infrastructure, supply chain management (SCM) and trade facilitation capabilities, which are calculated based on a world survey of international freight forwarders and express carriers. The LPI is based on six underlying factors of logistics performance: (1) efficiency of the clearance process by customs and other border agencies; (2) quality of transport and information technology infrastructure for logistics; (3) ease and affordability of arranging international shipments; (4) competence and quality of logistics services; (5) ability to track and trace international shipments; and (6) timeliness of shipments in reaching destination. LPI values range from 1 (worst) to 5 (best) and show that building the capacity to connect firms, suppliers and consumers, is a key in a world where predictability and reliability are becoming even more important than costs. A value of less than 3.0 reflects an array of problems within a nation's freight distribution system causing undue delays and additional costs. For instance, a difference of one point lower in the LPI is related to two to four additional days of port hinterland access and a 25% higher physical inspection rate at customs.

High-income OECD countries lead in logistics performances, but developing countries are showing gradual and continuous improvements. They benefit from economies of scale and scope, innovation and technological change in logistics services. On average, the LPI is a good proxy for involvement of each country in global value chains and the friction of freight flows and there is a significant concordance with the location of the world’s largest container ports. According to the LPI, Germany and Singapore, major global transport and logistics hubs, rank first. At the other extreme are low-income countries, particularly those landlocked in Africa and Central Asia. All developed countries turned out to be top performers. There are also significant differences among developing countries with similar incomes. China, for instance, ranks 27th, while countries in higher income groups, such as several oil producers, tend to perform below what would be expected from their income levels. Those developing countries with higher trade performances performed better than those with similar incomes.

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