Digital competitiveness and logistics performance

 

Logistics and supply chain management have become a way of life in modern society. From my morning coffee which is brought to my doorstep in five minutes, to the reconfiguration of global transportation and trading networks, logistics has transformed the world we are living in. 

But to what extent does logistics performance depend on our digital prowess and our adoption of modern technological advances? And is digital competitiveness the only prerequisite for logistics and trade performance? One would tend to think that the answer is obvious; but it is not. 

We have met technologically advanced countries lagging in logistics performance, but also logistics champions falling short in digital applications. To further explore this, we use comparable data from 50 countries, from the World Digital Competitiveness Rankings (WDCR) and the Logistics Performance Index (LPI). By integrating objective weighting (CRITIC), efficiency measurement (DEA) and categorical pattern analysis (MCA), we show that stronger logistics performance reduces uncertainty and information asymmetry costs. 

Digital prowess, however, is a necessary but not a sufficient condition for logistical performance and trade efficiency. For digitalization to be effective, other things need to be present too. These include land infrastructure, city-port relations, customs facilitation, last-mile investments, data-governance frameworks, well trained human capital, cybersecurity infrastructure and knowhow, and more (see HE Haralambides (forthcoming), “Ports, shipping and trade: the 40 years odyssey of a story-teller”. Amazon publishing, 2026). 

Many thanks to my coauthors Emrah Akdamar and Ersin Firat Akgul for an excellent research cooperation.

(published Open Access)

THE DEMAND FOR SHIPPING

Unless properly explained, I have often observed, in undergrad classes, a certain difficulty in comprehending why we measure the demand for shipping services in ‘ton-miles’; in other words, what distance has to do with a million tons of iron ore that we want to import from Brazil. The question was raised again this morning by a smart young lady, when I was showing them this picture:

«prof, I am importing a million tons of coal; what difference does it make if I bring it from the US or Australia?»

At first sight, and for someone introduced for the first time to shipping economics, the question appears plausible and legitimate. But the question only arises if we do not explain, right at the outset of the class, that, opposite to the supply of tonnage which is a ‘stock’ variable, as we say in economics, i.e., so many ships in the world as of January 1st, demand for shipping is a ‘flow’ variable; i.e., I am importing so many tons per year.

Still, the concept wasn’t clear to all. But there comes a young chap from the end of the room, saying:

«hey prof; can I try to explain this with a very simplistic example?»

I nodded him to the blackboard. And here he goes: (the text below is mine; Michael just did the calculations).

Assume the annual demand for shipping capacity is 1.2 million deadweight tons for the transportation of iron ore from Australia to China: distance (approx.) 4,000 nm.  The voyage takes 15 days and the job could be done by a single bulk carrier of 100,000 dwt in twelve trips (15x2x12=1 year). Now assume China decides to stop buying from Australia and switches to Brazil which, however, is three times the distance to Australia; i.e., 12,000 nm. The voyage of our bulk carrier would now take 45 days and thus the ship could make only 4 trips in a year (45x2x4=1year) and transport just 400,000 tons of iron ore. To bring 1.2 million tons to China in a year (our annual imports), we need either a bulk carrier of 300,000 dwt, i.e., three times bigger, or three bulk carriers of 100,000 dwt, like ours. The demand for shipping capacity has tripled.

P.S.1: Needless to say Michael is exempted from next week’s exam and he proudly knows it. 😊

P.S.2: Brokers: please don’t shoot the pianist: as Michael said, the example is simplistic and for illustrative purposes only. As such, the example has done its job (or so I hope).

HH