Factors Affecting Logistic Performance: A Global CrossSection Supply Chain Study

Factors Affecting Logistic Performance: A Global Cross-Section Supply Chain Study
by
MUHAMMAD ZAIN SIDDIQUI
Reg #: 8709
Submitted to: Mr. Farhan Mehboob
A thesis
submitted in partial fulfillment of the requirements
for the degree of Master of Business Administration
to
the Iqra University.
Karachi, Pakistan
MAY, 2015
Abstract
The underlying objective and purpose of this thesis is to test a model that
studies relationship between costs to export, cost to import, GDP, per capita income
and IT on logistics performance. This research will assist the logistics industry for
identifying the opportunities and challenges in terms of their trade logistics
performance, what factors affect this benchmarking tool and what steps can the
logistics industry take to improvise their performance. The data is selected for 41
countries worldwide on the basis of their land area from World Bank for the year of
2010.
When the viability of the model was checked the results shown that all the
independent variables contribute some exertions to affect the logistic performance of
any country. The exports and imports of goods and services contribute to about 40%
and 42% to the logistic performance to be precise. However, GDP, IT, and income per
capita have an impact of about 16%, 8%, and 61% to the logistic performance
respectively.
However, for the countries having lower degree of logistic performance can
improve their performance by focusing on their imports and exports of goods and
services, and their per capita income which are the factors having enormous effect on
the logistic performance of any country.

2
Table of Contents
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Factors Affecting Logistic Performance 4
Chapter 1 Introduction
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Factors Affecting Logistic Performance 5
1.0 Overview
The notion of logistics has travelled a long way in recent years. As previously
logistics was seen as individual components of product flow, such as storing, handling or
transport. However, now logistics has evolved into comprehensively managed and integrated
supply chains. Logistics form a significant base for success of organizations and businesses
around the world as the logistics processes of distribution, production and sourcing have
become global, and so countries need to focus on improving their logistic performance to
achieve long-term growth in international markets. In terms of global comparison, the
importance of logistic services largely depends on the nation’s economic power. For instance,
the prospects of logistics services have been quite strong in Europe, Japan, and United States
for a long time. There are certain factors that affect a dynamics of logistics in a country.
First of all foreign trade, especially export is quite important to increase a country’s
economic growth rate (Johnson, 2013). Moreover, export plays a key role for the countries to
receive a greater share of the global market. Satisfactory and sustainability levels of
countries’ export depend on exporting high value-added products and increasing the diversity
of products and markets. Meanwhile, foreign trade transactions exhibit a complex view and
have enhanced the importance of logistics. Logistics is considered as an important constituent
in the field of service, manufacturing and agriculture industry. Moreover logistics has to be
smoothly managed so that distribution and production functions can operate effectively.
According to a research by Hollweg and Wong (2009) cost to import & import of
goods and services; cost to export & export of goods and services and GDP are indirectly
proportional to logistics performance index. On the other hand IT expense is directly
proportional to logistics performance. In this regard, countries that work on controlling their

cost of import, cost of export, GDP, IT enhances the quality of logistics and ensures
competitiveness and eventually reach the top positions in the Logistics Performance.
According to Christopher (2012) efficiency of logistics can be measured through the
application of logistics performance index (LPI). This index primarily depends on the quality
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Factors Affecting Logistic Performance 6
and competence of customs and border management, trade and transport infrastructure and
logistics services. In this paper, it is worked on the model that studies relationship between
costs to export, cost to import, GDP, per capita income and IT on logistics performance.
This study investigates the affect of GDP, export and import of goods and services,
cost to export and import, IT, and income per capita on logistic performance. The
introductory chapter of this study will provide background information relevant to research
questions, its contextual framework, and problem identification, purpose of study, research
question, justification and limitation of this research.
1.1 Background
The prospect of logistics performance starts with its definition. According to World
Bank, the logistic performance of countries at the same level of per capita income with the
best logistics performance experience additional growth of 1% in gross domestic product
(GDP) and 2% in trade. So it’s essential to improve a countries’ logistics performance as it
has significant valuable effects on the statistics of a countries’ economy. Additionally no
matter if there is successful logistics or not the trade cycle is always present and it eventually
relies on the pace and extent of government strategy and measures that will liberalize
logistics supply (Havenga, 2011).
Furthermore World Bank denotes LPI as an index that captures mainly the main
features of the existing logistics environment. LPI is deliberated by the efforts of BRIC
countries (Brazil, Russia, India and China); World Bank; and various other sophisticated
emerging economies. Efficient supply chain and logistics of any country can become its
competitive advantage over its competitor, so focus should be on improving the Logistics
Performance Index of a country.
LPI, as implied by the acronym, places great emphasis on performance, expressed

through the reliability and predictability factor, unlike the conventional performance metrics,
such as average delays and direct freight costs, or more generically expressed in terms of time
and costs. World Bank representatives, experts in the field, and academics, came to the
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Factors Affecting Logistic Performance 7
conclusion that, currently important indicators such as reliability, predictability and quality of
service, along with transparency of processes, cannot be comprehended solely from costs and
time information. “The predictability and reliability of shipments, while more difficult to
measure, are more important for firms and may have a more dramatic impact on their ability
to compete” (Arvis, et al 2007:4).
1.2 Problem Statement
In the year 2007, Singapore had the highest logistic performance index score of 4.19
with logistic competence of 4.21 which is the highest of all (World Bank). Whereas, when the
data was extracted for the year 2010 Germany was the country where logistic performance
index found to be 4.11 with logistic competence of 4.11 (World Bank). (Shown below in
table 1.2.1)
Table: 1.2.1
LPI Score
4.19
LPI Score
4.11
Korinek and Sourdin (2011) study based on low, middle and higher-income countries
gives the idea that relationship between logistics and trade is directly proportional. Efficient
logistics facilitates trade and play a crucial role of transporting goods over international
border. On the other hand if logistics performance is inefficient, it will result in trade block
up due to extra money and time needed (Korinek & Sourdin, 2011).
As developed countries are shifting from traditional agriculture and manufacturing
model to globalized trade they are increasingly interacting in international markets and need
an efficient logistics services to gain competitive advantage. Therefore in this study we try to
focus on logistics of developed and developing countries and finds out how quality and

competency of logistics services is affected by country specific factors such as, GDP, export
and import of goods and services, cost to export and import, IT, and income per capita.
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Factors Affecting Logistic Performance 8
1.3 Purpose of Research
As mentioned above the quality logistics performance serves as a competitive
advantage for countries. This research has tried to find factors which affect the Logistics
dynamics and efficacy. For this research 41 country’s data will be assessed and influence of
different variables will be examined on logistics. The independent variables which are
selected for this research are also important and critical in today’s world i.e. GDP, export and
import of goods and services, cost to export and import, trade services, IT, and income per
capita. This research can serve as a guideline for regulatory bodies to select strategic actions
for improving their logistics. The fundamental idea of this research is to study the
relationship between logistics performance and cost to export, cost to import, GDP, trade
services, per capita income and IT (Arvis, et al 2007) on the basis of a model. This research
will explore the relationship between dependent and independent variables on the basis of a
model.
1.4 Objectives of Research
The objective of this research is to assess the concept of logistics performance and
various factors that affect its efficacy. The value of logistics performance is dependent on
various factors and this paper explores the relationship among them.
1.5 Research Questions
This study proposes to study the following questions:
1. What is the impact of export and cost of goods and services on Logistics Performance?
2. What is the impact of import and cost of goods and services on Logistics Performance?
3. What is the impact of GDP on Logistics Performance?
4. What is the impact of per capita income on Logistics Performance?
5. What is the impact of Information Technology on Logistics Performance?
1.6 Research Hypothesis
1. HO1: Export and cost of goods and services does not affect Logistics Performance?

2. HO2: Import and cost of goods and services does not affect Logistics Performance?
3. HO3: GDP does not affect Logistics Performance?
4. HO4: Per capita income does not affect Logistics Performance?
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Factors Affecting Logistic Performance 9
5. Ho5: Information Technology does not affect Logistics Performance?

1.7 Limitation of Study
There are certain limitations in this research.
1. Limitation in terms of variables is that we have limited exposure of variables as we
included the effect of only cost to export, cost to import, GDP, per capita income and IT
on logistics performance, however dynamics of logistics are influenced by various other
factors apart from these. Moreover, Researchers can include other factors to investigate
logistics performance further.
2. Another limitation is that this study is conducted on cross sectional data of 2010, so
using panel or time series data can offer additional insights about the relationship of
dependent and independent variables.
3. The data gathered in this research is based on 41 countries that are selected on the basis
of their size. So further research can include other countries as well.
4. Quantitative model has been applied to study association between dependent and
independent variables, so qualitative aspects can also be assessed to further gain insights
into this topic.
1.8 Scope
This research comprises on the data of 2010 for 41 countries. The data was taken from
the website of World Bank. The countries were chosen on the basis of their size (area) and
logistics data availability. Similarly, the research area can be more broaden by taking the data
for more countries other than these 41 already selected on the base of their land area.
Moreover, the research is based on the impacts of costs of exports and imports of goods and
services, GDP, IT, and income per capita, where more other variables can be added to gauge
the impact on logistic performance.

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Factors Affecting Logistic Performance 10
Chapter 2 Literature Review
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Factors Affecting Logistic Performance 11
2.1 Theoretical Background
The theories of management that can be applied to the domain of logistics
management are relationship orientation (Panayides & So, 2005), resource-based view
(Rungtusanatham, Salvador, Forza & Choi, 2003), competitive advantage (Sandberg &
Abrahamsson, 2011) transaction cost analysis (TCA) (Bowersox, Mentzer & Speh, 2008),
and the principal-agent theory (PAT) (Fei & Yun-fei, 2009).
According to Panayides and So (2005) the idea of relationship orientation denotes
proactively creating, developing and maintaining strong relationships with stakeholders that
would ultimately provide benefit in the form of mutual exchange and profitable opportunities.
Similarly in the domain of logistics management there are varies parties or stakeholders
acting hand in hand to support the intricate operations of logistics, this there is a dire need for
efficient relationship orientation.
Moreover, the link between resource based view and logistics management is that
capabilities and resources can only be obtained from a particular market to certain extent and
after that there is a need to outsource the resources from other markets (ldórsson & Skjøtt-
Larsen, 2004). In this regard the concept of logistics becomes very important because it
shows that it’s important for a country to improve it logistics services to achieve long-term
mutual commitment (Rungtusanatham, Salvador, Forza & Choi, 2003). Similarly if a country
wants to attain the competitive advantage it need to improve its logistics performance
(Sandberg & Abrahamsson, 2011).
To add on, the connection among transaction cost analysis (TCA) and logistics
management is that TCA sets the boundaries of firms in terms of entering into inter-
organizational arrangements. The underlying idea is that a firm can decrease its overall
transaction costs by partnering and cooperating with external parties. A firm should perform
those activities internally or within their local geographical domain, in which it has a

competitive edge and for others, the firm should outsource them from external or
international parties, thus fostering International logistics (Bowersox, Mentzer & Speh,
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Factors Affecting Logistic Performance 12
2008). So all in all, the approach of TCA is used to decide on the make-or-buy decisions in
supply chains, for example restructuring of supply chains, buyer supplier relationships and
outsourcing of logistics activities.
Lastly, since there is separation of economic activities and ownership among principle
and agent, agency problems can incur, such as bounded rationality, behavior based on self-
interest, outcome uncertainty, differences in risk aversion, conflicting objectives and
asymmetric information among agent and the principal and the agent. In this regard, an
important issue of logistics management is the alignment of incentives, as misalignment
frequently comes from hidden information or hidden actions. Nevertheless, the prospect of
misalignment can be controlled by creating contracts with supply chain partners balancing
penalties and rewards.
2.2 Logistics
Logistics by definition is considered a functional system that incorporates
coordination and combination of operations of diverse transport modes as a primary pre-
requisite for making sure that there is efficient service (Leal, 2012). In other words, logistics
can be defined as a management framework for business planning for management of capital
flows, information, service and material. Logistics function also incorporates the intricate
control systems, IT and information that are needed in today’s dynamic business
environment. Furthermore logistics can also be defined as the replacement, distribution,
maintenance and procurement of material and personnel.
Logistics framework typically consists of physical distribution of services and goods,
internal operations; physical distribution and internal operations; and physical supply of
goods and services (Mentzer, Stank & Esper, 2008). Simultaneously, logistics framework can
be seen as a structure that ensures that a country have the right type of service or product
designated at the right order, place and time. However, our expectations for a firm or
company are directly related to logistics.

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Factors Affecting Logistic Performance 13
2.3 Empirical Studies
According to Arvis and colleagues (2014) “improving logistics performance is at the
core of the economic growth and competitiveness agenda.” Considering this, the global
policymakers must distinguish the sector of logistics as a key milestone for their growth and
development. Sustainable and seamless logistics are seen as engine of integrating global
marketplace and value chains by the trade powerhouses like the Netherlands or developing
countries such as Indonesia. The author’s further stress on the idea that is logistics is
inefficient, and then it can reduce the prospects of global integration and increase the costs of
trading.
Considering this, one of the important goals of the global economy is to enhance the
prospect of logistics framework (Waters & Rinsler, 2014). To add on, according to Waters
and Rinsler (2014) the institution of Global Supply Chains has raised the issue of moving
goods inexpensively, reliably and rapidly around the globe. As the importance of logistics has
increased steadily, there is a mounting necessity of assessing the components of logistics and
comparing different countries performance and data with regard to these components.
The prospect of logistics performance starts with its definition. According to World
Bank, the logistic performance of countries at the same level of per capita income with the
best logistics performance experience additional growth of 1% in gross domestic product
(GDP) and 2% in trade. So it’s essential to improve a countries’ logistics performance as it
has significant valuable effects on the statistics of a countries’ economy. Additionally no
matter if there is successful logistics or not the trade cycle is always present and it eventually
relies on the pace and extent of government strategy and measures that will liberalize
logistics supply (Havenga, 2011).
The framework of Logistics Performance Index (LPI) is measured by World Bank a
tool to survey on the operators in charge of trading and moving goods. A report taken from
the World Bank gives the idea that LPI is produced to close the knowledge gap related to
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Factors Affecting Logistic Performance 14

logistics and to facilitate nations in developing reforms of to improve their competitive
circumstances. The results of LPI ranking introduce some interesting findings; first, the
higher the score in terms of LPI, the greater the countries’ role in logistics industry, and vice
versa. On a second note, scoring low in LPI terms can be interpreted as being “trapped in a
vicious circle of overregulation, poor quality services, and under- investment” (Arvis, et al
2007).
Furthermore World Bank denotes LPI as an index that captures mainly the main
features of the existing logistics environment. LPI is deliberated by the efforts of BRIC
countries (Brazil, Russia, India and China); World Bank; and various other sophisticated
emerging economies. Efficient supply chain and logistics of any country can become its
competitive advantage over its competitor, so focus should be on improving the Logistics
Performance Index of a country.
LPI, as implied by the acronym, places great emphasis on performance, expressed
through the reliability and predictability factor, unlike the conventional performance metrics,
such as average delays and direct freight costs, or more generically expressed in terms of time
and costs. World Bank representatives, experts in the field, and academics, came to the
conclusion that, currently important indicators such as reliability, predictability and quality of
service, along with transparency of processes, cannot be comprehended solely from costs and
time information. “The predictability and reliability of shipments, while more difficult to
measure, are more important for firms and may have a more dramatic impact on their ability
to compete” (Arvis, et al 2007:4).
According to Christopher (2012) efficiency of logistics can be measured through the
application of logistics performance index (LPI). This index primarily depends on the quality
and competence of customs and border management, trade and transport infrastructure and
logistics services.
In a study performed by Mohan in 2013, it was showed that the logistics management
has effect on global competitiveness. Furthermore, the paper also examined the salient
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Factors Affecting Logistic Performance 15
features of Indian logistics systems (Mohan 2013). The prospect of logistic performance

index is built upon previous literature (Arvis, Mustra, Panzer, Ojala & Naula, 2007). Its focus
however, is primarily on supply chain performance, and its indicators have been developed in
such a way that, they complement the existing competitive indicators in the two fore-
mentioned studies.
According to Islam (2014) LPI consists of two main parts, namely International and
Domestic LPI. The former has encompassed a range of metrics, they estimate as crucial in the
current international trading environment, and conditions:
1. Shipment’s timeliness in reaching target location
2. Effectiveness of clearance process monitored by customs agencies
3. Quality of transport infrastructure that is needed for efficient logistics
4. Affordability and easiness of arranging shipments
5. Ability to trace and track shipments
6. Proficiency in local logistics industry (for instance, customs brokers and transport operators)
7. Costs of domestic logistics (for instance, warehousing, terminal handling and local
transportation)
The second constituent of logistics performance is domestic logistics performance
indicator that provides quantitative and qualitative assessments of a country’s logistics by
professionals working inside it. According to Solakivi, Töyli, Engblom and Ojala (2011)
domestic logistics tend to include comprehensive information on the cost data, performance
time, institutions, and core logistics processes and logistics environment.
2.4 Logistics Framework
The significance of having an efficient logistics framework is currently acknowledged
by decision makers worldwide. Private operators move commerce and trade are moved and
within borders. Logistics performance actually measures the competence of these supply
chain -logistics performance. The value of logistics performance depends on government
policy that is formulated by regional economic groups and individual countries in
development and regulation of services, infrastructure provision or trade facilitation all the
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Factors Affecting Logistic Performance 16
way with the help of friendly border procedures that substantially facilitate in efficient

performance of logistics (WTO 2014).
According to Puertas, Martí and García (2013) the provision of International LPI is
based on assessment of foreign operators and that consider the average of six components,
namely, tracking and tracing; services quality; infrastructure; customs; timeliness; and
international shipments.
Fig 2.4 Input and Outcome LPI Indicators
Retrieved From: (WTO 2012)
The components of supply chain delivery and logistics are selected on the basis of
empirical and recent theoretical research and moreover on practical understanding of logistics
professionals that are concerned with international freight forwarding (as shown in Fig 2.4).
There have been four logistics performance surveys made so far accordingly in 2007, 2010,
2012 and 2014. On the basis of the worldwide survey of express carriers and global freight
forwarders, the LPI is regarded as a benchmarking tool that evaluates performance of a
country in terms of the efficacy of its logistics supply chain. This index allows comparisons
of 160 countries, and therefore helps the countries in identifying opportunities and challenges
in improving their logistics performance (WTO 2014). The value of logistics LPI ranges from
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Factors Affecting Logistic Performance 17
1 to 5, in which higher the number of index, the better comparative performance of the
country (The World Bank 2014).
First of all foreign trade, especially export is quite important to increase a country’s
economic growth rate (Johnson, 2013). Moreover, export plays a key role for the countries to
receive a greater share of the global market. Satisfactory and sustainability levels of
countries’ export depend on exporting high value-added products and increasing the diversity
of products and markets. Meanwhile, foreign trade transactions exhibit a complex view and
have enhanced the importance of logistics. Logistics is considered as an important constituent
in the field of service, manufacturing and agriculture industry. Moreover logistics has to be
smoothly managed so that distribution and production functions can operate effectively.
According to a research by Hollweg and Wong (2009) cost to import & import of
goods and services; cost to export & export of goods and services and GDP are indirectly

proportional to logistics performance index. On the other hand IT expense is directly
proportional to logistics performance. In this regard, countries that work on controlling their
cost of import, cost of export, GDP, IT enhances the quality of logistics and ensures
competitiveness and eventually reach the top positions in the Logistics Performance
(Hollweg & Wong, 2009).
Gogoneata (2008) stated that nations that are leading the International markets are
characterized by major logistics hubs and global transport, which obtained huge advantage of
globalization’s consequences. In terms of LPI, the lowest developed countries are placed at
the base of ranking, as they are going through constant resources shortage and experiencing
conflicts. The LPI is quite important for comparing between nations and for cross-sectional
statistical investigations (Gogoneata, 2008).
To add on, a research concluded that “least developed countries in terms of logistics
are making a significant effort to improve their situation, which is boosting international trade
and their own economic growth” (Puertas, Martí & García, 2013).
2.5 GDP
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Factors Affecting Logistic Performance 18
According to Korinek and Sourdin (2011) trade logistics serves a very important job
in facilitating trade services as it supports the transportation of international goods and
services. On the other hand, if the logistics services are inefficient then they tend to impede
trade services as there is imposition of extra money and time cost.
Now a day’s developed nations are shifting from traditional agriculture and
manufacturing and are progressing towards international vertical specialization, so due to this
transition there is greater need for competent logistics services. Furthermore when quality of
logistics services is enhanced, it improves a country’s competitive position by decreasing the
overall costs that are involved in transporting good. So cost of imports and exports are closely
link of logistics performance index (Korinek & Sourdin, 2011).
Moreover, according to a research study by Gogoneata (2008) the findings portray
that logistics performance improves as the share of value added services and exports increase
in GDP. Therefore, the findings point to an elevated elasticity of logistics performance to the

expansion of services’ sector, as compared to the relative importance of exports. To add on,
the research findings suggest that lower descriptive influence of exports for logistics
performance can be defended on the note that a higher portion of exports in GDP are
observed from middle-income nations, that indulge in international trade on one hand, but do
not possess adequate resources to build better institutions and infrastructure (Gogoneata,
2008).
2.6 Cost to Export & Import
According to Arvis, Saslavsky, Ojala, Shepherd, Busch and Raj (2014) there is a
strong association between logistics performance, consistency of supply chains and the
service delivery certainty. So this denotes the idea that efficient logistics of a country directly
supports its export function. Moreover, according to Puertas, Martí and García (2013) in
terms of assessing a country’s export competitiveness; logistics performance has evolved as a
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Factors Affecting Logistic Performance 19
decisive factor. According to World Economic Forum (2013) there is massive potential for
enhancing global trade and export by reducing barriers of logistics and supply chain.
Furthermore it is not easy for an exporter to export their goods and services at
competitive prices if the logistics and transport sector is dysfunctional or inefficient. This
means that if there is lack of certainty in logistics and transport, poor service and high prices,
then it will translate in the form of isolating the country from world markets (Arvis et al.,
2013).
2.7 Per Capita Income
Yildiz (2014) states that “as domestic production per capita increases, so does the
range of human activities, both for society as a whole and for individual lifestyles. Thus, each
development proposal must be examined not only for its economic, environmental and social
impacts, but also for its implications for transport.” This denotes that as per capita income
increases, it directly influences the increasing need for efficient transportation, which is turn
leads to improvisation in logistics performance.

2.8 Information Technology

According to OECD (2002) the use of “ICT has improved the exchange of supply
chain information, leading to the development of integrated production and logistics
management systems and has thereby improved supply chain performance in many ways.”
This portray that due to the provision of improving Information technologies in any country,
the logistics performance also improves significantly. This relationship in directly influenced
by provision of Electronic Data Interchange (EDI) and ICT-supported information exchange
systems.
Moreover, the effects of technological innovation and advanced information
technologies on logistics is logistics performance improvement as information exchange in
supply chain is improved; development of logistics management and integrated production
systems improved management of logistics; and the provision of Electronic Data Interchange
(EDI) radically altered the manner in which commercial and international transactions were
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Factors Affecting Logistic Performance 20
being managed, thereby promoting the prospects for improved logistics performance (OECD,
2002).
To add on provision of IT enables creation of new supply chain structures. Direct
trade is enhanced due to easy access to information between users and suppliers leading to
provision of easily available information to all partners of supply chain. These initiatives
have also resulted in creation of a particular service, known as ‘virtual logistics chain’
(Lusch, 2011). Other avenues created by the prospect of leading IT that foster logistics
performance are Value-Added Network (VAN), PARIS (Planning And Routing Intermodal
System) and Information Clearing House (ICH) (OECD, 2002).
Furthermore, Information technology promotes contributing to intermodal transport
and modal shift. The idea is that is transport and logistci8s technology will develop; it will
increase intermodal transport’s competiveness. Well-organized system of information
technology has condensed cost and processing time and formed seamless links, by this means
easing out intermodal transport (OECD, 2002).
2.9 Conceptual Framework
The research is based on a conceptual framework that seeks to analyze the effect of

cost to export (Arvis, Saslavsky, Ojala, Shepherd, Busch, & 2014; Hausman, Lee &
Subramanian, 2005; Naudé & Matthee, 2012; Turkson, 2011); cost to import (Arvis,
Saslavsky, Ojala, Shepherd, Busch, & 2014; Hausman, Lee & Subramanian, 2005; Naudé &
Matthee, 2012; Turkson, 2011); GDP and Trade services (Diop, 2010; Havenga, 2011); and
per capita income (Portugal-Perez & Wilson, 2012) on logistics performance.
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Factors Affecting Logistic Performance 21
Chapter 3 Methodology
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Factors Affecting Logistic Performance 22
3.1Research Purpose
The underlying objective of this thesis is to analyze the effect of cost to export, cost to
import, GDP, per capita income and IT on logistics performance. This research will assist the
logistics industry for identifying the opportunities and challenges in terms of their trade
logistics performance, what factors affect this benchmarking tool and what steps can the
logistics industry take to improvise their performance.
Logistics industry is growing at an increasing pace but on the other hand, according to
Business Recorder estimate, “Pakistan is losing $2.6 billion annually because of
inefficiencies in its logistics despite the significant growth in the efficiency of the road
transport system” (Mirza, 2013). So if logistics industry focuses on leveraging the key
logistics performance indicators (LPI) then they can gain competitive advantage in long-run.
3.2 Research Approach
The approach of this research is based on multiple regressions that are focused
on learning more about the relationship between several independent or predictor variables
and a dependent or criterion variable. This thesis utilizes multivariate regression analysis that
describes and evaluates the relationships between a given dependent variable and one or more
independent variables.
3.3 Research Design
A general perception of quantitative research is to assess the association between
dependent and independent research variables. In this cross-sectional research focus has been

on statistical and numeric data collected from World Bank to study the effect of dependent
variables on independent variables with the help of a proposed mode. Historical statistics has
been used in this research. The research design connects the whole idea of research project
together. The main approach is to conduct a quantitative analysis by gathering data from
authentic sources. The criteria for selecting particular countries in data selection have been
the size of the countries. The research data for this research was obtained from World Bank
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Factors Affecting Logistic Performance 23
on the basis of size of country and the list of countries that are included in the data set for
quantitative research is attached as Appendix 1.
3.4 Secondary Data:
Data is collected from the World Bank’s website. In this, sample size of the study Top
41 countries on the basis of country sizes. In this study (OLS) ordinary least is used. This is a
procedure to determine the relationship between the dependent and independent variable. In
this study sample size top 41 countries based on year 2010. Ordinary least (OLS) is used in
this study. It is a procedure to work out the relationship between the predictor (dependent)
variable and predicted (independent) variables.
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Logistics Performance
Cost to ExportGross Domestic Product
IT
Per Capita Income Cost to Import
3.5 Research Model
Figure 3.7 Factors Affecting Logistic Performance
LPI = α + β1 (ImpCost) + β2 (ImpG&S) + ϵ (Equation 1)
LPI = α + β1 (ExpCost) + β2 (ExpG&S) + ϵ (Equation 2)
LPI = α + β1 (GDP) + ϵ (Equation 3)
LPI = α + β1 (Income per capita) + ϵ (Equation 4)
LPI = α + β1 (IT) + ϵ (Equation 5)
3.6 Variables Description

3.6.1 Dependent Variable:
LPI: Logistic Performance Index:
Data relevant to the logistics performance is collected from World Bank. In logistics
performance Index survey of 2009 more than 5,000 countries were included in evaluation that
was carried out by almost 1,000 international freight forwarders. The research respondents
evaluated eight markets on a scale of 1 to 5, on the basis of six dimensions. The dimensions
are neighboring countries connecting country with global markets, landlocked countries,
random selection, significant import and export markets of respondent's country.
3.6.2 Independent Variable:
GDP
According to Korinek and Sourdin (2011) if there is efficient trade logistics in any
country then it will facilitate trade services of the country and thereby improve the outlooks
for GDP growth. Moreover the quality of logistics services serves an integral role in terms of
supporting transportation of goods in international trade. In this research, GDP is measured in
US Dollars.
Income per Capita
Yildiz (2014) states that “as domestic production per capita increases, so does the
range of human activities, both for society as a whole and for individual lifestyles. Thus, each
development proposal must be examined not only for its economic, environmental and social
impacts, but also for its implications for transport.” This denotes that as per capita income
increases, it directly influences the increasing need for efficient transportation, which is turn
leads to improvisation in logistics performance. In this research, income per capita is
measured in US Dollars.
Cost to Export & Import
According to Puertas, Martí and García (2013) the notion of logistics performance has
become a decisive factor in export competitiveness. At the same time, and as a result of the
continuous enlargement processes it has undergone, the European Union is a very interesting
case to study how the reforms that enhance logistics performance have affected export. In this
research, cost to export & import is measured in US Dollars.
IT