The oft overlooked field of logistics and its fundamental components of transport, warehousing, inventory, supply and customer service is today a crucial driver of competitive advantage at the level of individual corporations, at the level of complete production systems often referred to as ‘supply chains’ and also at the level of the entire economies of nations and regions.
The World Bank’s Logistics Performance Rankings
Every two years the World Bank produces a report that examines the logistics capabilities of countries around the world under various headings such as the efficiency of border crossing processes, the quality of infrastructure such as ports, roads, railways and information technology, and the competence of logistics operators among other factors. Top of the list is Singapore, a small country that has transformed itself into THE logistics hub par excellence of the Asia-Pacific region. Other countries among the top 10 on the World Bank’s Logistics Performance Index include Hong Kong, the Netherlands, Germany, Japan, US and UK.
National development strategies are about choices and priorities and it is clear to me that any country that aspires to success in the globalised economy of the twenty first century must dedicate commitment and resources at the highest level to its strategy for developing logistics capabilities and infrastructure as an essential competitive differentiator with respect to its peers. Essential infrastructure such as ports, airports, roads, rail and information technology on the one hand together with streamlined processes in customs clearance and payment authorisation on the other are crucial outcomes for countries and regions that wish to carve out for themselves a place at this top table.
Transport Technology and Globalization
While the current wave of globalization is not the first that the world economy has undergone – indeed some argue that in the late nineteenth and early twentieth centuries, economic globalization in some ways surpassed that of today –what is different this time is that advances in transport technology in particular have transformed the economics of global trade in an unprecedented way. Since the introduction in the 1950s of two apparently mundane innovations – the first being the introduction of containerisation for maritime transport of general cargo and the second being the use of cargo aircraft for the rapid transportation of valuable and perishable goods over long distances – logistics capability has become a key differentiator between companies, supply chains and nations.
These innovations have transformed international trade and economics in ways that are still unfolding today. For example air cargo capability has become a fundamental element in the ultra efficient lean global supply chains for valuable parts and components as well as for fresh and perishable goods. Further and ongoing advances in container ship design and size and the upgrading of the Panama Canal is continuing to transform the economics of the long distance transport of cargo and is catalysing the infrastructural developments of lesser known US East Coast ports such as Charleston, SC and Savannah, GA and European west coast ports such as Gijon in Spain and Sines in Portugal.
Driver of Trade and Growth
As this 21st century advances it will become ever more apparent that logistics capability is the essential driver in international trade and growth. As a business owner or manager, how can you best align your company’s strategies and capabilities to take advantage of this trend?