Question

• Discuss the catalysts of growth in international trade and illustrate this idea using the expansion of container shipments across the globe
• Measure the logistics performance using key dimensions such as infrastructure, tracking & tracing, to name a few
• Understand and apply the concept of transfer pricing
• Measure the shipping connectivity using measures such as LSCI, CPCI, LSBCI (e.g. what is the difference between LSCI and LPI?)
• Discuss the factors considered for foreign direct investment (FDI)
• Discuss the directional imbalance that exists in container shipping (e.g. what are the reasons for this directional imbalance? How to solve the issue of empty container repositioning?)

Answer 1

LOGISTICS AND SUPPLY CHAIN MANAGEMENT DEMANDS THE CONTINUOUS MONITORING AND MANAGING OF EVER INCREASING SHIPMENT CHAINS. THIS MOTIVATES THE NEED FOR GOODS-CENTRIC TRACKING AND TRACING OF LOGISTICS ITEMS, WHICH ENSURES THE OPPORTUNITY TO INCREASE VISIBILITY AND CONTROL IN DIFFERENT LOGISTICS OPERATIONS OF A COMPANY. RECENT TECHNOLOGICAL DEVELOPMENTS ENABLE MANUFACTURING COMPANIES TO TRACE AND TRACK GOODS OVER THEIR ENTIRE LIFE CYCLE AND MANAGE SUPPLY CHAIN OPERATIONS ACROSS ORGANISATIONAL BOUNDARIES. THE LACK OF MANY SERIOUS TOOLS FOR EVALUATING COUNTRY-LEVEL LOGISTICS EFFICIENCY IS PARTLY DUE TO RESEARCH GENERALLY BEING DONE MORE COMMONLY AT A MICRO-LOGISTICS LEVEL RATHER THAN AT THE LEVEL OF GLOBAL LOGISTICS. WHILE EFFECTIVE MICRO-LOGISTICS TEND TO RESULT IN A MORE EFFICIENT COUNTRY-LEVEL LOGISTICS SYSTEM, IT IS IMPORTANT FOR GOVERNMENTS TO SEE AND COMPARE THEIR COUNTRIES’ LOGISTICAL AND TRANSPORT SYSTEMS AGAINST OTHER COUNTRIES IN ORDER TO UNDERSTAND EXISTING BOTTLENECKS.

LOGISTICS AND TRANSPORT HAVE BEEN INCREASINGLY PLAYING A PIVOTAL ROLE IN INTERNATIONAL TRADE RELATIONS. SEVERAL STUDIES HAVE SHOWN LOGISTICS TO BE POSITIVELY CORRELATED TO INTERNATIONAL TRADE THROUGH DIFFERENT ANALYTICAL APPROACHES. SOME STUDIES LINK LOGISTICAL PERFORMANCE FLUCTUATION WITH INTERNATIONAL TRADE VOLUME CHANGES ,SHOWING CORRELATION BETWEEN KEY LOGISTICAL INDICATORS AND WORLD TRADE.

WHILE LOGISTICS PERFORMANCE INDEX (LPI), ARE A RESULT OF A PERCEPTION SURVEY OF LOGISTICS OPERATORS ON THE GROUND (GLOBAL FREIGHT FORWARDERS AND EXPRESS CARRIERS), BY MEANS OF PROVIDING FEEDBACK ON THE COUNTRIES THEY DO BUSINESS WITH, LSCI AIMS AT CAPTURING AND BENCHMARKING A COUNTRY’S LEVEL OF INTEGRATION INTO GLOBAL LINER SHIPPING NETWORKS.

A FOREIGN DIRECT INVESTMENT (FDI) IS AN INVESTMENT MADE BY A FIRM OR INDIVIDUAL IN ONE COUNTRY INTO BUSINESS INTERESTS LOCATED IN ANOTHER COUNTRY. GENERALLY, FDI TAKES PLACE WHEN AN INVESTOR ESTABLISHES FOREIGN BUSINESS OPERATIONS OR ACQUIRES FOREIGN BUSINESS ASSETS IN A FOREIGN COMPANY.

DIRECTIONAL IMBALANCE IN TRADE BETWEEN COUNTRIES IMPLIES THAT MANY CARRIERS ARE FORCED TO HAUL EMPTY CONTAINERS BACK. IMBALANCE IS A CONCEPT THAT SUGGESTS A LACK OF STABILITY, AND IN RELATION TO SUPPLY CHAIN IT IS ONE TYPE OF INSTABILITY THAT IF OCCURS WOULD HAVE SUBSTANTIAL COSTS ON ORGANIZATIONS. IT IS A MISMATCH THAT HAPPENS ALONG THE SAME CORRIDOR CAUSING LARGE NUMBERS OF EMPTY CONTAINERS TO BE SHIPPED BACK TO THE SOURCE.

REDUCING TRANSPORT AND STORAGE COSTS CAN BE ACHIEVED BY INFLUENCING THE TRANSPORT AND STORAGE DIRECTLY BY STRIVING TO AVOID TRANSPORT MOVEMENTS OR TO MAKE THE BEST OF THE FACT THAT EMPTY TRANSPORTS CANNOT BE AVOIDED OR SIGNIFICANTLY REDUCED BY, E.G., APPLYING APPROPRIATE PRICING STRATEGIES AND INFLUENCING ACTUAL TRANSPORT COSTS. ONE SIMPLE IDEA TO REDUCE EMPTY CONTAINER TRANSPORT COSTS IS TO USE SPARE CAPACITIES ON A VESSEL (IN PARTICULAR IN TIMES WHEN SUPPLY OF CAPACITY EXCEEDS DEMAND) BY FILLING EMPTY SLOTS WITH EMPTY CONTAINERS IN ORDER TO BALANCE SURPLUS AND DEFICIT IN THE RESPECTIVE AREAS OF THE VESSEL’S ROUTE. THIS CONCEPT CAN BE ENHANCED IN A CARRIER COOPERATION SCENARIO WITH THE DEFICIT OF ONE CARRIER BEING COVERED BY THE SURPLUS OF A DIFFERENT CARRIER RESULTING IN A WIN-WIN SITUATION. ONE OPTION WITH RESPECT TO PRICING IS TO COMPENSATE REPOSITIONING COSTS BY CHARGING A HIGHER FREIGHT RATE ON THE OPPOSITE LEG WITH HIGH DEMAND.