MODERNIZING FOOD SUPPLY CHAINS...MODERNIZING FOOD SUPPLY CHAINS Session 2: Food supply and demand...
Transcript of MODERNIZING FOOD SUPPLY CHAINS...MODERNIZING FOOD SUPPLY CHAINS Session 2: Food supply and demand...
MODERNIZING
FOOD SUPPLY CHAINS Session 2: Food supply and demand –
improving productivity growth and supply chains
ROLANDO T. DY, Ph.D.
Professor
School of Management
UNIVERSITY OF ASIA AND THE PACIFIC (UA&P)
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R. Dy, UA&P, 2014
OUTLINE
• Objectives
• Role of Modern Supply Chains
• Commodity Examples: rice, fruits and vegetables, meat, fish
• Factors which affect chain competitiveness
• Asian Connectivity
• Country Examples: Philippines and Indonesia
• Moving Towards Effective Supply Chains
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OBJECTIVES
• Discuss the food supply and
demand issues in Asia, with
focus on ASEAN
• Assess technological and policy
innovations required to meet food
security needs moving towards
2025
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The Role of Modern Supply Chains in
Assuring Food Availability
Quantity of product delivery
Supply reliability: speed, timeliness, tracking
Cost to final consumer
Product quality and food safety
More choices
LOGISTICS is vital
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COMMODITY EXAMPLES
• Rice
• Fruits and Vegetables (banana, apples, oranges and grapes, shallots and onions, garlic)
• Meat (chicken meat)
• Fish (shrimps and prawns, tunas - frozen, catfish - frozen)
RICE: Southeast Asia has huge surplus
* Average from 2011-2013,; limited data for Myanmar
Source of basic data: UN Trademap
SOURCES
TOTAL: 16.3 M tons*
DESTINATIONS
Thailand49%
Vietnam18%
Cambodia33%
Philippines7% Indonesia
11%
Malaysia5%
Singapore3%
Brunei0.3%Others
74%
SOURCES
TOTAL: 16.3 M tons*
DESTINATIONS
RICE: East Asia is a small market for SE Asia
Thailand49%
Vietnam18%
Cambodia33%
China3%
HongKong2%
Japan2%
Taiwan1%
S. Korea1%
Others92%
* Average from 2011-2013
Source of basic data: UN Trademap
SOURCES
TOTAL: 458,300 tons*
DESTINATIONS
RICE: East Asia is a minor trader
China92%
Japan7%
S. Korea1%
Taiwan1%
Philippines0.3%
Indonesia0.6%
Malaysia0.1%
Singapore0.2%
Brunei0.001%
Others99%
* Average from 2011-2013
Source of basic data: UN Trademap
RICE SHIPMENTS TO EAST AND SE ASIA
http://www.oryza.com/news/rice-news/igc-estimates-2014-
Asian Rice Supply Chain Non-Exporter
Internal Bottlenecks
• Small production lots
• Poor road network
• Post harvest losses
• Inefficient mills
• Inefficient ports (exit and entry)
FARMS
(small) Traders/
Assemblers
Rice Mills
(small)
Wholesaler
Land L
Wholesaler Urban retailer
Sea L
L L
Port
of Exit
Port of
Entry
Asian Rice Supply Chain Exporting country to importing country
FARMS
(small) Traders/
Assemblers
Rice Mills
(small)
L
L
Exporters’ Warehouses
Port
of Exit
Port of
Entry
Importers’ Warehouses Wholesaler
Urban retailer
L
L
L
Internal Bottlenecks
• Customs
• Stevedoring
• Port Handling
• Informal Costs
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RICE LOGISTICS COSTS Coast wise shipping can be higher than ocean freight
Item Luzon
(Manila)
Visayas
(Cebu)
Mindanao
(Davao)
Ocean freight, Ho Chi Minh to Manila 27.50 27.50 27.50
Local Costs
Wharfage 0.85 0.85 0.85
Arrastre 6.79 6.79 6.79
Stevedoring 5.63 5.63 5.63
Checking 0.44 0.44 0.44
Coast wise freight 0 24.19 35.58
Land transport 6.48 6.48 6.48
Handling 2.98 2.98 2.98
Total at P43:US$1 23.17 47.36 58.75
Rice Logistics Costs: Vietnam to Philippine Ports Foreign and Local logistics cost (US$/MT) in Mid-2014
Source of basic data: National Food Authority
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RICE: Issues facing effective transport in the
ASEAN
RDY_UAP_2014
Current Status: Trade is well-developed
Exporters: Thailand, Vietnam, Cambodia and Myanmar
Importers: Indonesia, Malaysia, Philippines, Singapore, Brunei
Issues: Tariff barriers: poor internal transport – ports, roads and inter-island, post harvest losses
SOURCES
TOTAL: 2.7 M tons*
DESTINATIONS
FRUITS-BANANAS: Philippines dominates
Philippines98%
Malaysia1%
Thailand1%
Japan39%
China16%S. Korea
11%
Singapore6%
Indonesia0.1%
Vietnam0.1%
Others28%
* Average from 2011-2013
Source of basic data: UN Trademap
CHINA
TOTAL: 1.2 M tons*
DESTINATIONS
APPLES, ORANGES AND GRAPES:
China game
Apples83%
Grapes9%
Oranges8.3%
Vietnam12%
Indonesia12%
Thailand11%
Philippines7%
Malaysia5%
HongKong3%
Singapore1%
Brunei0.002%
Japan0.0001%
Others49%
* Average from 2011-2013
Source of basic data: UN Trademap
SOURCES
TOTAL: 709,500 tons*
DESTINATIONS
VEG - SHALLOTS AND ONIONS: China is dominant
China99%
Philippines1%
Japan39%
Vietnam18%
Malaysia9%
Thailand6%
S. Korea5%Philippines
3%
Indonesia2%
HongKong1%
Singapore1%
Brunei0.01%
Others16%
* Average from 2011-2013
Source of basic data: UN Trademap
TOTAL: 1.6 M tons*
DESTINATIONS
GARLIC: China is dominant
Indonesia27%
Vietnam9%
Malaysia6%
Thailand4%
Philippines4%
S. Korea2%
Japan1%
Singapore1%
Brunei0.1%
HongKong0.0%
Others46%
* Average from 2011-2013
Source of basic data: UN Trademap
Asian Fruit and Vegetable Supply Chain Non-Exporter
Internal Bottlenecks
• Small production lots
• Poor road network
• Post harvest losses
• Inefficient cold chains
• Inefficient ports (exit & entry)
• Bio security
FARMS
(small) Small Traders/
Assemblers
Wholesaler
Land L
Wholesaler Urban retailer
Sea L
L L
Port
of Exit
Port of
Entry
Asian Fruit and Vegetable Supply Chain Exporting country to importing country
FARMS
(small) Assemblers
Packing Houses
L
L
Exporters’ Warehouses
Port
of
Exit
Port of
Entry
Importers’ Warehouses
Wholesaler
Urban retailer
L
L
L
Internal Bottlenecks
• Customs
• Stevedoring
• Port Handling
• Informal Charges
• Cold Chain supply and cost
• Bio security
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FRUITS AND VEGETABLES: Issues facing
effective transport in the ASEAN
Current Status: China is dominant in fruits
and vegetables
Banana: Philippines is dominant
Issues: Cold chain development, post harvest
losses, high transport cost, food safety, non-
tariff barrier?
SOURCES
TOTAL: 1.6 M tons*
DESTINATIONS
POULTRY (CHICKEN): Southeast Asia
US 6%
Brazil94%
Canada0.2%
Singapore1%
Malaysia0.2%
Philippines0.1%
Brunei0.03%
Indonesia0.003%
Others98.7%
* Average from 2011-2013, chilled or frozen
Source of basic data: UN Trademap
SOURCES
TOTAL: 1.6 M tons*
DESTINATIONS
US 6%
Brazil94%
Canada0.2%
Japan1%
HongKong0.2%
Taiwan0.05%
S. Korea0.01%
China0.006%
Others99%
POULTRY (CHICKEN): East Asia
* Average from 2011-2013
Source of basic data: UN Trademap
Asian Meat Supply Chain Non-Exporter
Internal Bottlenecks
• Small production lots
• Poor road network
• Inefficient cold chains
• Inefficient ports (exit & entry)
• Bio security (FMD)
• Food safety
FARMS
(small) Small Traders/
Assemblers
Wholesaler
Land L
Wholesaler
Urban retailer
Sea L
L L
Port of Exit
Port of
Entry
Asian Meat Supply Chain Exporting country to importing country
FARMS
(small) Slaughter Houses/
Dressing Plants
L
L
Exporters’ Warehouses
Port
of
Exit
Port of
Entry
Importers’ Warehouses
Wholesaler
Urban retailer
L
L
L
Assemblers
Internal Bottlenecks
• Customs
• Stevedoring
• Port Handling
• Informal costs
• Cold Chain supply and cost
• Bio security (FMD and Avian Flu)
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MEAT: Issues facing effective transport
Current Status:
• Most supply to Asia originates from the Americas
• Thailand is a global of processed chicken exporter to
Japan and EU
• Small processed chicken exports by Malaysia and the
Philippines to Japan
• Most meat comes from USA, Brazil, Australia
Issues:
• Farm competitiveness and scale
• Internal cold chains
TOTAL: 107,800 tons*
DESTINATIONS
SHRIMPS AND PRAWNS: East and Southeast Asia
Japan27%
Vietnam3%
China 2%
HongKong1%Singapore
1%
Malaysia1%
Taiwan1%
Thailand1%
S. Korea0.4%
Philippines0.1%
Brunei0.01%
Others63%
* Average from 2011-2013
Source of basic data: UN Trademap
TOTAL: 84,600 tons*
DESTINATIONS
TUNAS, frozen: East and Southeast Asia
Thailand39%
Japan26%
China 4%
Vietnam3%
S. Korea2%
Singapore1%
Philippines1%
Malaysia0.4%
Taiwan0.3%
HongKong0.2%
Others24%
* Average from 2011-2013
Source of basic data: UN Trademap
TOTAL: US$1.6 B*
DESTINATIONS
CATFISH, frozen: East and Southeast Asia
HongKong2%
Singapore2%
Philippines2%
China 2%
Thailand1%Malaysia
1%
Taiwan1%
S. Korea0.2%
Japan0.2%
Indonesia0.1%
Others89%
* Average from 2011-2013
Source of basic data: UN Trademap
Internal Bottlenecks
• Small production lots (small fishers and small fish ponds)
• Poor road network
• Inefficient cold chains
• Inefficient ports (exit & entry)
Asian Fish Supply Chain Non-Exporter
FARMS
(small) Small Traders/
Assemblers
Wholesaler
Land L
Wholesaler Urban retailer
Sea L
L L
Port of
Exit
Port of
Entry
Fish processing
plants
Asian Fish Supply Chain Exporting country to importing country
FARMS
(small) Assemblers
L
L
Exporters’ Warehouses
Port
of Exit
Port of
Entry
Importers’ Warehouses
Wholesaler
Urban retailer
L
L
L
Fish processing
plants
Internal Bottlenecks
• Customs
• Stevedoring
• Port Handling
• Informal costs
• Cold Chain supply and cost
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FISH: Issues facing effective transport in the
ASEAN region
Current Status:
Shrimps are major exports
Foreign fleets supply tuna to processing plants
Vietnam export of pangasius catfish to ASEAN is growing
Issue: Internal cold chains needs upgrading
Flood safety (traceability)
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Issues Facing Effective Transport of Key Commodities
(Rice, Fruits and Vegetables, Fish, Meat) in the ASEAN Region
Internal transport efficiency and
service quality for most countries
Emerging non-tariff barriers?
Cross Cutting
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Factors which affect chain competitiveness
• Border management
• Logistics costs
Fuel costs
Port costs
Road network
• Power costs
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The World Bank on Border Logistics
Efficient border
management is
critical for
eliminating
avoidable delays
and enhancing
predictability in
border clearance.
If service delivery
is poor, good
physical
connectivity is
not enough
Increased
complexity, no
more low-hanging
fruits
Trade facilitation
and border
reforms matter
The LPI shows that
quality of services is
driving logistics
performance in
emerging and richer
economies
The World Bank
LOGISTICS METRICS
Supply chain
service
delivery
Service delivery
performance
outcomes
Time, cost,
reliability
Customs
Infrastructure
Services
quality
Timeliness
International
shipments
Areas for
policy
regulations
(inputs)
Tracking and
tracing
Source: World Bank (2014 ). Connecting to Compete. Trade Logistics in the Global
Economy
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Logistics Performance Index (LPI)
Rankings of Asian Countries, 2014
• Global Top 10: Singapore (5), Japan (10)
• Top 10 Upper Middle Income Performers: Malaysia
(25), China(28), Thailand (35)
• Top 10 Lower Middle Income Performers: Vietnam
(48), Indonesia (53), India (54), Philippines (57),
Pakistan (72).
• Top 10 Low Income Performers: Cambodia (83),
Nepal (105), Bangladesh(108)
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LPI Rankings, 2014 Ranks among 160 countries
Bru Cambo Lao Malay Myan Indon Phil Sing Thai Viet
LPI Rank - 83 131 25 145 53 57 5 35 48
Customs - 71 100 27 150 55 47 3 36 61
Infrastructure - 79 128 26 137 56 75 2 30 44
International
Shipments
- 78 120 10 151 74 35 6 39 42
Logistics quality
and competence
- 89 129 32 156 41 61 8 38 49
Tracking - 71 146 23 130 58 54 11 33 48
Timeliness - 129 137 31 117 50 90 9 29 56
Source: World Bank (2014 ). Connecting to Compete. Trade Logistics in the Global Economy
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Fuel Costs in Asia, June 2014 Brunei, Indonesia and Malaysia have high subsidies
Unleaded Gas
US Dollar /liter
Diesel
USD/liter
Brunei 0.44 0.27
Cambodia 1.37 1.29
Indonesia 0.98 1.09
Malaysia 0.59 0.56
Philippines 1.28 1.01
Singapore 1.83 1.37
Thailand 1.51 0.92
Vietnam 1.20 1.07
China 1.34 1.25
Source: Mytravel cost.com Lao PDR and Myanmar data are not available
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Benchmarking Port Costs in Asia, 2006
Source: Port Benchmarking for Assessing Hong Kong’s Maritime Services and Associated Costs with other Major International
Ports. Marine Department Planning, Development and Port Security Branch, December 2006
Road Network Across SE Asia, c.2010
Country Road Length
km
Paved Roads
km
Percentage
Paved
Land area
Sq km
Paved roads
(Km/10
sq.km)
Vehicles per
1000 pop
Brunei D 3,127 2,883 92.2 5,770 5.0 38
Cambodia 44,900 3,881 8.6 181,040 0.2 17
Indonesia 476,300 313,500 65.8 1,904,569 1.6 296
Lao PDR 41,030 5,703 1.4 236,800 0.11 171
Malaysia 157,167 127,517 81.1 329,750 3.9 672
Myanmar 150,800 33,014 21.9 678,500 0.5 39
Philippines 31,359 24,834 79.2 300,000 0.8 74
Singapore 3,412 3,412 100 693 49.0 185
Thailand 114,437 108,158 94.6 514,000 2.0 432
Vietnam 301,000 198,000 65.8 329,560 6.0 17
Source: ASEAN as cited by ADB Report on Cross-Subregional Economic Ties (2012)
Road Density and Quality
Country Road km per
km2
Road km per
capita
% of roads
paved
% of roads in
good
condition
% of roads in
good or fair
condition
Philippines 671 2.45 20 18 50
China 201 1.44 81 na na
India 1138 1.49 47 na na
Indonesia 203 0.98 58 na 54
Japan 3230 9.21 78 na na
Korea 1016 2.09 87 87 100
Malaysia 300 3.97 81 78 98
Pakistan 335 1.70 65 88 100
Thailand 112 0.90 98 98 100
Vietnam 287 2.70 19 na na
Source: World Bank Road Network Databank, World Bank Database on Infrastructure (Policy Research Paper 3643), June 2005
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Power Cost affects Cold Chain Costs
http://www.investphilippines.info/arangkada/climate/business-costs/ (2010)
A factory in the Philippines pays more than twice as much for power
than factories in Indonesia, Malaysia, Thailand and Vietnam
In US cents/kwh, circa 2010
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Power cost in Asia
Power cost with and without consumer subsidy, 2010
Many ASEAN countries subsidize consumers
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Asian Connectivity
• The Asian Highway network is a regional transport
initiative aimed at enhancing the efficiency and development
of the road infrastructure, supporting the development of Euro-Asia
transport linkages and improving connectivity for landlocked countries.
• The Highway network now comprises over 141,000 km
of roads passing through 32 member countries. The
network extends from Tokyo in the east to Turkey in the west and from Russian
Federation, in the north, to Indonesia in the south.
http://www.unescap.org/our-work/transport/asian-highway/about
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Asian Connectivity
Forms of cooperation
• Concrete achievements of subregional programs such as the Central Asia Regional Economic Cooperation (CAREC) program, Greater Mekong
Subregion (GMS) regional economic cooperation program, and the Bay of Bengal Initiative
on Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
• Needed now: a second generation of cooperative
initiatives, which focus on greater connectivity between existing subregions and
subregional programs.
• the opening up of Myanmar provides us with a golden
opportunity to connect South Asia with Southeast Asia and the GMS region. There
are also possibilities to boost connectivity between South Asia and Central Asia.
Source: Gross (2013), ADB
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Asian Connectivity
An integrated transport approach - linking roads,
rail, and sea routes to cover the vast distances as well as
diverse geography within Asia is absolutely critical.
At the same time, resource requirements for regional connectivity are large,
and immediate cost recovery may not always be feasible, calling for a judicious
combination of various sources of financing.
Source: Gross (2013), ADB
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Greater Mekong Subregion Transport
Connectivity
http://media.economist.com/images/
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Pushing for the Roll-on, Roll-off (RORO) routes
• Davao, General Santos City, and Bitung in Indonesia
• Brooke's Point, Palawan and Kudat, Sabah.
Source: Annual BIMP-EAGA Strategic Planning Meeting, February 2014, Davao City
Brunei Darussalam-Indonesia-Malaysia-Philippines
East ASEAN Growth Area (BIMP-EAGA)
BIMP EAGA RO-RO Network
Source: Mindanao Development Authority, Davao City
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PHILIPPINES: Traffic congestion
Fix traffic or the Philippines can lose US$140 million daily by
2030 from US$55 million in 2012 – JICA
www.rappler.com/business/economy-watch/
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PHILIPPINES: High cost of domestic shipping
• The Philippine Institute of Development Studies, a government think
tank, recommends a serious review of lifting cabotage
restrictions.
• Joint Foreign Chambers of Commerce in the Philippines: “It is
cheaper to send a container from Manila to Cagayan de
Oro via Hong Kong or Kaohsiung than to simply transport the
cargo directly from Manila to Cagayan de Oro.”
• A 40-footer container shipping from Manila to Cagayan de Oro costs
$1,860, more expensive than foreign transshipment via Hong Kong at $1,144
and via Kaohsiung at $1,044. A local trader could save approximately 43
percent in shipping costs via transshipment.
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PHILIPPINES: Transport Infrastructure
Road density is on par with comparable
countries in the region but road quality compares less
well. The result is that the Philippines suffers from higher
land transportation costs and a higher rate of accidents
compared to other parts of the East Asia region
Poor road quality results in intercity freight rates that
are 50 percent higher than in Thailand or Vietnam. The
poor road surface translates into higher vehicle operating
costs per kilometer.
Source: Philippines. Transport for Growth: An Institutional Assessment of Transport Infrastructure. Report No. 47281-PH. World Bank. February 24, 2009
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• Assessments of the overall transport infrastructure
network indicate that the quality is low and
cost is high compared to other
countries. The Philippines ranks low in logistics
index
Source: Philippines. Transport for Growth: An Institutional Assessment of Transport Infrastructure. Report No. 47281-PH. World Bank. February 24, 2009
PHILIPPINES: Transport Infrastructure
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INDONESIA: Transport Costs
• Unreliable and expensive road transportation is a constraint.
• Regulatory red-tape and high domestic
transportation costs hampers Indonesia’s trade
competitiveness (Carana, 2004).
• The discrepancy between national and local
regulatory practices. In particular, local governments often
issue permits and licenses and impose user charges that act as barriers to
the transport of goods throughout the country.
Source: The Asia Foundation ( 2008 ). The Cost of Moving Goods: Road Transportation, Regulations and Charges in Indonesia.
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INDONESIA: Transport Costs
• Vehicle operating costs in Indonesia are higher than in
other Asian countries, due in part to poor road infrastructure and
mountainous terrain.
• Drivers are liable for various kinds of payments, including:
local user charges; legal and illegal payments at weigh bridges; and
payments to police or preman (criminal organizations).
• User charges are fees set by local governments for
transporting goods and make up almost 50% of total payments along some
routes. Many user charges are in fact illegal and redundant.
Source: The Asia Foundation ( 2008 ). The Cost of Moving Goods: Road Transportation, Regulations and Charges in Indonesia.
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Moving Towards Effective Supply Chains
1. Address in-country costs
(a) Port handling
(b) Border controls
(c) Transport –land, air, water
(d) Review legislations (e.g. Cabotage Law)
2. Address cold chain costs
(a) Cost of vehicle fuel
(b) cost of electricity
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Moving Towards Effective Supply Chains
3. Address infrastructure deficiencies and quality
(a) Sound planning and resource allocation
(b) PPP
(c) Central and local government coordination
4. Promote greater transparency and collaboration among players of the chain
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5. Enhance Asian Connectivity
(a) Asia /Greater Mekong/EAGA land connectivity
(b) Bitung-General Santos RO-RO
(c) Brooke's Point, Palawan and Kudat, Sabah RO-RO
6. Tighten food safety and bio security
measures
Moving Towards Effective Supply Chains
R. Dy, UA&P, 2014
Conclusions
Logistics efficiency is strongly associated
with supply chain reliability and the predictability of
service delivery for producers and exporters.
Supply chains are only as strong as their
weakest links. They are becoming more and more
complex, often spanning countries while remaining critical to
national competitiveness.
Comprehensive reforms and long-term
commitments from policymakers and private
stakeholders will be essential.
R. Dy, UA&P, 2014
THANK YOU!