A survey by the Department of Trade and Industry (DTI) links low logistics performance in the Philippines to high logistics cost, and identifies reliability as the leading supply chain performance issue for stakeholders.
The same survey found logistics cost per sales in the Philippines higher than many neighbors in ASEAN; and logistics cost per sales based per region highest in Mindanao.
These findings are part of the first Logistics Efficiency Indicator (LEI) project, an analysis of the logistics performance of the Philippines carried out by the DTI in partnership with the World Bank Group-International Finance Corporation. The results of the project were unveiled on August 1.
The LEI project measures industrial logistics performance in the Philippines by using a questionnaire adapted from World Bank questionnaires to assess three key performance indicators (KPIs) of logistics efficiency: cost, time, and reliability.
From February to May 2017 DTI, in collaboration with local professional organizations, gathered data among manufacturers and logistics service providers from various sectors in Manila and Laguna.
“The measurement of logistics cost, time, and reliability will enable us to have a baseline data that will be used to identify and assess the existing difficulties and the areas that need to be improved in this sector,” DTI Undersecretary Ruth B. Castelo said at the launch of the results of the project.
Data from 2016 ranked the Philippines 71 out of 160 countries in the World Bank Logistics Performance Index, the fourth lowest in the ASEAN, followed by Cambodia, Myanmar and Laos.
According to the new LEI survey results presented by World Bank consultant Dr. Ruth Banomyong, logistics cost per sales in the Philippines reached 27.16% compared with Vietnam’s 16.3%, Indonesia’s 21.40%, and Thailand’s 11.11%.
By region, logistics cost per sales was highest in Mindanao at 30.32%. The same measure was 25.08% in Visayas, and 17.48% in Luzon.
“There is a relationship between logistics cost and logistics performance as a whole. Logistics cost tends to increase when you have lower logistics performance,” said Banomyong.
Of three KPIs–reliability, cost and time–reliability came out as the area needing the most improvement (according to 44% of survey respondents) compared with cost (30%) and time (26%).
The most common performance issues include those on customs process, congestion and weather, and cargo delays.
To resolve these issues, Banomyong suggested creating awareness of a well-developed logistics plan, conducting supply chain studies on best/worst performing sectors, conducting logistics corridor studies, and professionalizing the logistics industry.
He recommended sharing of logistics best practices among peer groups from different sectors, supporting logistics outsourcing, and harmonizing domestic logistics with international logistics standards.
He said assuring reliability and removing uncertainties in the Philippine logistics system are key to reducing logistics cost and increasing logistics performance competitiveness.
DTI is expected to conduct the survey every two years, with studies on specific issues in between. – Aubrey Joyce Bajo
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