There has been considerable growth in world trade over the years and most of you would be aware that the growth of world trade depends on a number of factors such as the efficiency of logistics services and other trade support structures. Even though logistics services play a critical role when it comes to supporting commercial activities, the level of analysis regarding the same has been low or minimal.
In this article, we will be discussing how logistics performance has been affecting international trade. We were able to learn that the overall performance of logistics has been positive. The finding also revealed that multiple dimensions, which capture logistics performance have positive and significant effects on international trade, especially exports.
It is true that the contribution of logistics services to a country’s national output might not seem that competitive when compared to other sectors. That said, logistics play a crucial role when it comes to supporting other activities, which cannot be overlooked or undermined.
One of the most popular connections between national development and transport and logistics in international trade facilitation, which in turn delivers several other beneficial social and economic outcomes. The logistics and transport sector makes it possible for businesses to complete exports and imports of goods and services.
Here are a few common issues that businesses may suffer if they seek the help of an amateur or poor logistics service.
A Beginner’s Guide On The Effects Of Logistics Services On World Trade
Logistics and Transport services not just facilitate international trade, but also play a key role in the development and growth of the local economy. The efficiency and quality of logistics services will surely matter for international trade. In fact, weak operational processes and logistics can be a major challenge for global trade integration. On the other hand, improved and efficient trade-related logistics along with a liberalized economic environment will be able to boost the trade volume. Logistics services play the crucial role of offering sectoral connections inside the local economy. In addition to that, they also connect international and domestic economies. It is also important to remember that the connectivity of tourism, agri-food, manufacturing, agriculture, and other inter-dependent production sectors can be strengthened with the help of efficient logistics and transport systems.
It is true that the contribution of logistics services to a country’s national output might not seem that competitive when compared to other sectors. That said, logistics play a crucial role when it comes to supporting other activities, which cannot be overlooked or undermined.
One of the most popular connections between national development and transport and logistics in international trade facilitation, which in turn delivers several other beneficial social and economic outcomes. The logistics and transport sector makes it possible for businesses to complete exports and imports of goods and services.
Here are a few common issues that businesses may suffer if they seek the help of an amateur or poor logistics service.
- Limited coordination between countries when it comes to border procedures
- Inefficient customs clearance processes
- Infrequent and costly shipping
- Delays in tracing and tracking consignments
- Delays in the clearance of goods and terminal handling
- Lack of cool storage facilities
- Inability to certify the quality of products
An Overview Of Logistics Performance
Unfortunately, the exact size of the logistic sector on a global scale is not known clearly. An analysis of logistics data conducted by Shepherd in 2011 revealed that the logistics sector contributes to the GDP by approximately 5 percent with a reported range of two to twelve percent. It is evident that world trade has witnessed a massive increase since the year 2000. This means that the logistics sector’s contribution to the national output of several countries is more likely to get accelerated as more and more countries have become outward-oriented. It is important to note that the World Bank has started to produce some measures of the Logistics Performance Index (LPI) since the year 2007. Published data that measure the performance of logistics in countries that are members of the World Bank are available for several years including 2016, 2014, and 2012. Did you know that the overall LPI is measured by the World Bank on a scale from low (1) to high (5)? You need to understand that this measure is actually the weighted average of different country scores that covers 6 separate sub-dimensions of logistics service performance. The sub-dimensions are as follows.- The ability to trace and track consignments
- Quality and competence of logistics services
- Customs clearance process efficiency
- Quality of transport and trade-related infrastructure
- The ease of how they arrange competitively priced shipments
- The frequency in which shipments reaches the destination
