The Concept of Logistics Performance in International Trade Framework: An Empirical Evaluation of Logistics Performance Index

The Concept of Logistics Performance in International Trade Framework: An Empirical Evaluation of Logistics Performance Index

Cevat Bilgin (Bursa Technical University, Turkey)
DOI: 10.4018/978-1-7998-1397-2.ch006

Abstract

An increased need for international logistics has emerged with a higher degree of globalization. The quality of logistics services determines the degree of a country's involvement in global trade. In this chapter, the concept of logistics performance in the international trade context is discussed, then the measurement problems of logistics performance are discussed. The links between logistics, trade, and growth are evaluated theoretically. Policymakers and researchers have been widely using Logistics Performance Index (LPI) developed by the World Bank. LPI provides a general information of logistics costs, customs processes, and the quality of the necessary infrastructure for transportation for each country. In this chapter, the definition, the methodology, and the aspects of the indicator LPI, its content and components, and the relations between LPI and some economic factors such as growth and foreign trade, are elaborated. The econometric modelling methods are used to analyze the relations between LPI and economic factors.
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Literature Review

An increased need for international freight transportation and thus international logistics has emerged with a higher degree of globalization. The efficiency of moving goods across and within borders is directly related to logistics. The participating manners of countries in international marketplace has been shaped by their performance in this area. It can be said that the pillars of global trade are logistics since the supply chains are being diversified globally. The quality of logistics services determines the degree of a country’s involvement in global trade. The influential countries in today’s international trade are the ones who have managed to impose significant logistics-related reforms. While developing countries have made notable progress in this field in recent years, their logistics performances are comparatively inadequate. The lack of substantial reforms in some countries has been claimed as the sources of the differences in logistics performances between high and low-income countries. Moreover, logistics performances of countries are significantly related to economic growth and competitiveness in global trade. Countries having inefficient logistics services are likely to be exposed to higher costs of doing business. This situation implies financial barriers to the efficient integration of the countries with international value chains. Additionally, the case of higher costs is likely to reduce the potential competitiveness of the countries in global marketplace.

The exchanging and trading goods physically across borders and moving them within borders are sustained by a network of services is called logistics. Specifically, the services such as warehousing, brokerage, express delivery, critical infrastructure services are defined within this network. Besides, multiservice logistics providers offer more diversified solutions for trade, commerce, and manufacturing sectors for upper competitive powers in the context of international trade (Arvis et. al., 2018).

Key Terms in this Chapter

Logistics Performance Index: A survey in which logistics professionals evaluate the logistics environments of their countries conducted by the World Bank. LPI offers essential and detailed information on logistics environments, processes, and institutions for each country.

Services Quality: The competence of logistics services to fulfill the requirements for an efficiency logistics sector.

Logistics: A network of services for exchanging and trading goods physically across borders and moving them within borders

Logistics Performance: Efficiency of supply chains in increasing the capabilities of firms to attain domestic and international trade opportunities A belief that one's own culture is superior to other cultures.

Systemic Risk: The vulnerability of the general structure to minor shocks because of the fast spreading potentialities of the shocks.

Outsourcing Logistics Services: Transferring most of the logistics operations to external providers by manufacturers and traders so ensuring the manufacturers to focus on their own business.

Trade Facilitation: Simplification and harmonization of international trade procedures; the main activities, practices and procedures to submit, collect and process the compulsory information for international goods trade.

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