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Logistics performance thailand
1. Logistics Performance Measurement in Thailand
Ruth Banomyong (PhD)
Centre for Logistics Research
Thammasat University
ruth@banomyong.com
2. Agenda
1. Introduction
2. Research Objectives
3. Literature Review
4. Logistics Performance Measurement
Framework
5. Thailand’s Logistics Performance Results
6. Comparing against the WB’s Logistics
Performance Index
7. Summary
The author would like to acknowledge the presentation done by Ojala &
Lorrentz on May 12, 2011 entitled “Towards an improved methodology in
logistics cost and performance measurement through the LPIO network” in the
literature review
3. Introduction
• Since 2001, Thailand has recognised
logistics development as a national
priority.
• A national logistics development policy
has been approved for the period 2006-
2010.
• The NESDB is currently reviewing the
existing plan and is developing the new
plan for the next 5 years.
4. Thailand Logistics Development Strategy (2006-2010)
16% 13%
Vision To establish a world-class logistics system to support Thailand
(2005) (2010)
as Indochina’s trade and investment center
1.5
1 To enhance trade facilitation with an aim to increase cost efficiency and customer
responsiveness of businesses, and also reliability and security of their logistics process)
Objective
2 To create economic value from the logistics and other supporting industries 1
7.3
6
1 2 3 4 5
New Trade
Strategic Business Lanes and Logistics Service
Trade Facilitation Capacity
Agenda Logistics Logistics Internationalizati
Enhancement Building
Improvement Network on
Optimization
7.2
Implementation
1. Aim at the world-class technology and skills. 6
2. Focus primarily on strategic industries.
Principles 3. Any change management must be customer oriented.
5. Introduction
• The Thai Ministry of Industry is responsible for
the strategic agenda on “Business Logistics
Improvement”.
• The logistics bureau at the Department of
Primary Industries and Mines at the Thai
Ministry of Industry has the mission to support
and develop industrial logistic system in
Thailand.
• In collaboration with Thammasat University, a
study was conducted to assess logistics
performance of Thai firms in 2010.
6. Research Objectives
1. To Develop an Assessment Framework for
Firms’ Logistics Performance
2. To assess industries based on the ISIC code
3. To establish a logistics performance database
4. To disseminate logistics performance scores to
stakeholders
5. To improve Thailand’s logistics performance
based on benchmarking methodology
7. Literature Review:
Logistics concepts are not statistical units
• Firm level (survey) data vs. macro level statistics
• Linkage to National Accounts data only implicit
• Self-reported costs often subjective
– Aggregation may also lead to ”double counting”
– One respondent from a very large firm often
misleading
– SME data important to get a balanced picture
In short: severe knowledge gaps exist especially
on the concept of logistics costs
8. Main types of logistics study/survey
• Statistics-based studies applying models
– Econometric
– Other modelling approaches
• Case study-based approaches
• Surveys using questionnaires
– Comprehensive themes
– Single-theme surveys
9. However, severe knowledge gaps on
logistics performance indicators & costs
• Lack of uniform methods & terminology
• Very few cross-country studies made, thus
little comparative data exists across
– Countries
– Industries
• Comparisons across studies problematic
10. Examples of statistics-based logistics studies
• Annual State of Logistics Report U.S 1989
• Bowersox, Rodrigues, Calantone & Closs, Stank 1999, 2002, 2005
• South Africa State of Logistics Survey 2003
• Svensk Makrologistik (Sweden) 2008
• Radelet and Sachs 1998
• Lee & Hausmann (World Bank background note) 2005
11. World Bank case studies on national
logistics costs in Low-Income countries
• Arvis: Sub-Saharan and North Africa 2003
• Ojala: Moldova, Albania, Ukraine, Central Asia 2003
• Naula: Central Asia 2007
12. Examples of surveys using questionnaires
• ELA & A.T. Kearney 1987 5
• Master of Logistics 1990 10+
• Finland State of Logistics 1991 6
• German Logistics Association BVL 1995 10+
• State of Logistics: The Canadian Report 200X 3-4
• Norwegian Logistics barometer 2003 4
• SCI Logistics barometer Germany 2000s 3+
• ASLOG L'Etat de l'art de la logistique française 2005/2006 2+
• McKinsey Global Supply Chains 2006 & 2008 2
• LogOn Baltic Logistics Survey 2007 1
• World Bank Logistics Performance Index 2007 2
• Swiss Logistics market, St. Gallen University 2009 3
13. Logistics is an important source of competitive advantage
for large and medium-sized manufacturing and trading firms
Logistics has an
impact on… Customer service level
Logistics has an
impact on… Impact on profitability
Logistics is … Source of competitive advantage
Logistics is … Top management priority
0% 20 % 40 % 60 % 80 % 100 %
Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree
n=329; Finland State of Logistics 2009, available at: www.mintc.fi
14. How high are logistics costs for
manufacturing and trading firms?
Reviewing some recent survey results:
• No universal definition exists on firm or
macro levels, therefore conceptions
inevitable vary
• Translation and educational issues are
also prevalent in cross-cultural studies
15. Logistics cost indicators in the Baltic Sea Region in
2007, % of sales, N = 574
Manufacturing Wholesale & retail trade
Source: Ojala et al.; LogOn Baltic Master Report 3:2007, www.logonbaltic.info
16. Logistics Costs as a % of GDP in Brazil
12.1% 11.5% 11.6%
0.4% 0.4% 0.4%
100% 0.6% 0.6% 0.7%
90% Administration
Administrativo
80% 3.6% 3.7% 3.5%
Warehousing
Armazenagem
70%
60%
Inventory
Estoque
50%
40% Transportation
Transporte
7.5% 6.8% 6.9%
30%
20%
10%
0% Source:
2004 2006 2008
ILOS Institute
17. …but using costs as % of product value
provides a very different picture
Logistics Costs as Percentage of
Product Value, 2004
Based on Guasch and Kogan (2006) ; graph from Guerrero et al. 2010
18. The challenges of measuring logistics
performance on a national level:
Scarce empirical evidence
No generally followed methods
No uniform terminology
Limited or no comparability!!!
19. Logistics Management Defined
“Logistics Management is that part of Supply
Chain Management that plans, implements, and
controls the efficient, effective forward and
reverse flow and storage of goods, services and
related information between the point of origin
and the point of consumption in order to meet
customers' requirements. ”
Council of Supply Chain Management Professional(2004)
20. Key Logistics Activities
• Logistics communication & order processing
• Customer service & support
• Demand forecasting & planning
• Purchasing & Procurement
• Material handling & packaging
• Inventory Management
• Transportation
• Facilities site selection, warehousing & storage
• Return goods handling and reverse logistics
Source: Grant et al., 2006
20
22. KPI logistics assessment framework
Logistic activities Cost Time Reliability
Customer service and Ratio of customer service Average order cycle time DIFOT
support cost per sale
Purchasing and Ratio of procurement cost Average procurement cycle Supplier In Full and
procurement per sale time On-Time Rate
Information Processing Ratio of information Average order processing Order Accuracy Rate
processing cost per cycle time
sale
Transportation Ratio of transportation Average delivery cycle time DIFOT
cost per sale
Warehousing and site Ratio of warehousing cost Average inventory cycle time Inventory Accuracy
selection per sale
Demand planning and Ratio of forecasting cost Average forecast period Forecast Accuracy Rate
forecasting per sale
Inventory management Ratio of inventory Average inventory day Inventory Out of Stock
carrying cost per sale Rate
Material handling and Ratio of value damaged Average material handling Damage Rate
packaging per sale and packaging
Reversed Logistics Ratio of returned goods Average cycle time for Rate of Return Goods
value per sale customer return
23. KPI Assessment Framework
• However, not all KPIs are of equal importance.
• 9 key KPIs can reflect overall logistics
performance
Cost Time Reliability
Transport Order Cycle Delivery in Full
Time & on Time
Warehouse Delivery Cycle Forecast
Time Accuracy
Inventory Inventory days Return Rate
24. THAILAND’s Logistics Performance Results
Selected Samples from 5 industries: Only best-in-class are
chosen
Industry No. of company
Foods 48
Textiles 40
Electrical & Electronics 40
Automotives 32
Plastics 40
Total 200
30. A proposed Composite Performance Index
Cost Time Reliability
Average Average
Average Total Score
Trans Order Delivery Forecast Returned
Inv. cost WH cost Inventory DIFOT
cost Cycle Cycle Accuracy Rate
Day
Time Time
Food Median 0.73% 1.73% 3.56% 11.00 2.10 39.50 91.15% 86.00% 4.00%
Scale 4 3 3 3 3 3 3 3 3 3.11
Textile Median 1.23% 1.23% 3.61% 4.44 1.29 27.00 88.00% 84.50% 2.13%
Scale 4 3 3 3 3 3 3 3 3 3.11
EE Median 4.60% 0.94% 1.03% 6.44 1.67 26.50 91.50% 86.50% 2.04%
3.11
3.066
Scale 3 4 3 3 3 3 3 3 3
Auto Median 0.67% 1.41% 5.56% 28.50 1.23 26.00 88.50% 85.50% 2.26%
Scale 3 3 3 3 3 3 3 3 3 3.00
Plastic Median 1.87% 1.26% 4.84% 3.98 2.10 15.00 88.50% 94.00% 1.93%
Scale 3 3 3 3 3 3 3 3 3 3.00
31. Comparing against the WB’s LPI
Thailand (LPI) 2007 2010
Score 3.31 3.29
Rank 31 35
Note:
• Different time period so comparison not adequate
• Thailand’s own volatile internal political situation
must have increased negative perceptions (i.e.
Yellow vs. Red)
32. Comparing against the WB’s LP
• A follow up was conducted based on WB’s
LPI survey.
• The idea was to explore how Thai
manufacturers perceived logistics
performance in Thailand.
• The same 200 respondents provided the
answers.
35. Some observations…
• Perception is derived from manufacturers
not from external service providers
• In-depth understanding of the Thai context
• Infrastructure, Customs, Logistics Quality
and Compliance seems less problematic
• Similarities for timeliness, track & trace
36. Summary
2010 Indicators Score
World Bank LPI 3.29
200 Thai companies 3.45
(perceptual)
200 Thai companies 3.066
(composite index)
37. Future steps
• Weighting of dimensions to improve
composite index
• Expand coverage to 12 industrial sectors
• Sample to cover 500 firms
• Finalise database…
38. Thank you for your attention
Comments & Questions are
welcomed…
