Logistics costs in the modern economy – part 2
The problem of logistics costs, as well as various aspects of qualitative changes in the area of logistics that affect the level of these costs, are raised in a document published in Brussels on February 15, 2007, by the European Economic and Social Committee, titled “EESC Opinion on European Logistics Policy”.
According to the document, a comparison of logistics expenditures (including transport activities) with the size of the gross domestic product between Europe-15 and North America shows that the share of these costs in the GDP of European countries increased from 12.2% in 1998 to 13.3% in 2002. In the same period, logistics expenditures in North America decreased from 11% to 9.9%. The document also confirms that logistics costs in the economy are not sufficiently recognized, and significant logistics decisions are consequently made based on incomplete, and therefore far from perfect, information. This requires the development of models for calculating the costs actually incurred. Logistics costs should, in fact, constitute one of the significant indicators of the economic efficiency of enterprises.
The global economy is in a period of significant change. The latest phase of globalization began in the 1990s with the opening of rapidly developing Asian economies to the international market economy. This led to a significant delocalization of industrial production from developed exporter countries, along with logistics services. In Europe, there are also significant structural changes in industrial production and logistics service markets, which should be explained by the enlargement of the EU and the relatively rapid economic development of new member states. Here, too, there is a clear trend of delocalizing production to countries with low labor costs. Industrial production will grow primarily in the emerging markets of China, India, Brazil, and Russia, and at a slower pace in Eastern European countries, including Poland. Therefore, not only are the quantities of transported goods constantly increasing, but so are the transport distances. Controlling global supply chains is becoming time-consuming and costly, while decision-making centers could be moved to Asia. As competition between the world’s economic regions intensifies, the efficiency of transport infrastructure is becoming an increasingly important factor in competitiveness. Furthermore, the growth of production and consumption in Eastern European countries necessitates the modernization of transport infrastructure and its integration with the European Union’s transport system. From the point of view of industrial production organization and logistics services, the element determining the structure of supply chains is customer orientation. Supply chains differ from one another not only based on the different properties of products but also, and perhaps primarily, due to the needs and expectations of customers. System integration concerns not only technological aspects but also organizational ones and is based on knowledge. Shaping the structure of supply networks is based to a large extent on innovation, not only in relation to the objects of flow but also to processes and procedures. From a logistics point of view, supply chain management in modern market conditions and new business models constitute, as the conclusions of the cited document show, the most important areas of development. It should therefore be assumed that the nature of these changes, their intensity, and the scope of their application will affect the level of logistics costs in the economies of individual countries, and within individual countries – in selected industries.
Research on the magnitude of logistics costs in the economy has been conducted relatively regularly for many years. However, it is burdened with a fundamental flaw; different methods of calculating or estimating these costs are used, which results in significant differences in the presented results. For example, the research results presented by M. Christopher and H.Ch. Pfohl, obtained in the early 1990s by various institutions and concerning the share of logistics costs in sales revenue in selected countries of Europe and the USA, differ significantly. This is particularly visible in the case of transport costs, where the extreme values of the share for selected countries were: for Germany 2.10 – 5.81%, for Great Britain 1.10 – 2.65%, for Spain 1.44 – 4.08%, for Italy 0.70 – 3.46%. It is similar in the case of warehousing or inventory holding costs, where differences reach 100%. This can be understood given the mostly survey-based nature of data collection from various enterprises. However, the problem becomes more serious when significant differences appear in the estimation of the share of logistics costs in the gross domestic product. In “Wikipedia” (German language) under the entry “logistics”, we read: “the share of logistics costs in total costs is significant. In particular, this applies to transport and warehousing costs along with inventory holding. Logistics costs depend on the economic sector; for example, high logistics costs occur in the consumer goods industry. Logistics costs also depend on the level of economic development of countries. Thus, for example, the share of logistics costs in the gross domestic product of less developed countries is up to 20%, while in industrialized countries it is less than 5%”.
The article comes from the magazine “Logistyka” 5/2007.