1. The Importance of Measuring Philippines Logistics Performance
Ruth Banomyong (PhD)
World Bank/IFC Consultant
PhilExport GMM
September 2017

2. Outline
Outline
Why is it important to understand logistics performance?
Methodology & Data Collection
Respondents characteristics & freight flows
Philippines logistics cost/sales
By sector
By region
Philippines logistics performance
Logistics strategy development
Outsourcing and LSP capability
Logistics human resource
Summary and way forward…

3. Why is it important to understand logistics performance?
Logistics is a key opportunity to improve profitability and firms’ competitive performance.
Obtaining industrial sectors’ logistics performance is necessary for country to improve overall logistics capability.
Logistics costs increase with decreasing logistics performance.
Most of this increase comes from lower reliability and the need to increase inventory (“other costs”)
However, “cost” cannot be the only logistics performance dimension

4. Methodology & Data Collection
A questionnaire was developed based upon existing questionnaires developed by the World Bank for assessing industrial logistics performance
The DTI supported the data collection and key-in process
Data was collected in workshop format in key locations across the country in collaboration with main professional organizations in the country (i.e PhilExport)
Most respondents were SMEs

5. Data Collection Location No. Period Manila 32 Feb/March 2017
Clark, Pampanga 18
March 22, 2017
Batangas 10
April 4, 2017
Cebu 13
April 20, 2017
Iloilo 14
Davao 8
April 25, 2017
Tagaytay (Laguna and Cavite) 45
April 28, 2017
Cagayan De Oro 15
May 11, 2017
General Santos 4
May 16, 2017
TOTAL
159 respondents 

6. Location of respondents
The main respondents are from Manila and Laguna
Other respondents are scattered across the country

7. Main Manufactured Products
Products & Markets
Main Manufactured Products
Main Markets

8. Import flows

9. Export flows

10. Logistics cost/sales Cost/Sales Philippines Transport 10.71%
Warehousing
5.20%
Inventory carrying
8.78%
Logistics administration
2.47%
Logistics Cost/Sales
27.16%
Vietnam
Indonesia
Thailand
7.04%
8.81%
5.57%
3.78%
3.45%
2.49% 4%
7.19%
2.04%
1.48%
1.95%
1.01%
16.3%
21.40%
11.11%

11. Logistics cost/sales by sector
Philippine
Automotive
23.08%
Chemical products
43.30%
Construction materials
16.44%
Electronics
13.57%
Food
32.72%
Furniture & Decors
18.07%
Jewelry
16.87%
Textile & Garment
20.35%
Vietnam
Indonesia
Thailand
33.55%
16.84%
14.75%
27.14%
27.01%
10.09%
28.60%
35.13%
10.46%
4.40%
34.43%
12.14%
17.60%
20.97%
10.32% NA
45.32%
11.44%
20.47%
14.30%
16.01%
8.55%

12. Transport Cost Comparison by Sector
Transport and cargo handling cost (incl. transport packaging)
Philippines
Automotive
6.67%
Chemical products
11.90%
Construction materials
7.54%
Electronics
4.93%
Food
13.74%
Furniture & Decors
5.71%
Jewelry
6.75%
Textile & Garments
10.75%
Vietnam
Indonesia
Thailand
8.00%
4.35%
7.11%
9.00%
11.08%
5.30%
15.00%
11.54%
4.95%
3.00%
12.98%
4.84%
14.00%
9.04%
5.03% NA
8.50%
6.21%
9.33%
6.20%
3.89%

13. Warehouse Cost Comparison by Sector
Warehousing (cost of running own warehouse or buying the service)
Philippines
Automotive
6.00%
Chemical products
7.46%
Construction materials
4.66%
Electronics
4.00%
Food
5.55%
Furniture & Decors
5.43%
Jewelry
0.25%
Textile & Garments
2.75%
Vietnam
Indonesia
Thailand
1.00%
1.77%
4.37%
6.00%
3.42%
1.73%
5.00%
3.83%
2.46%
10.83%
4.36%
3.70%
2.28% NA
6.70%
2.18%
2.60%
2.39%
1.88%

14. Inventory Cost Comparison by Sector
Inventory carrying cost
(incl. cost of capital tied in inventory)
Philippines
Automotive
8.31%
Chemical products
20.00%
Construction materials
2.74%
Electronics
3.40%
Food
10.45%
Furniture & Decors
5.29%
Jewelry
8.33%
Textile & Garments
5.00%
Vietnam
Indonesia
Thailand
21.50%
9.19%
1.93%
9.67%
10.05%
2.14%
6.00%
16.57%
2.10%
0.00%
7.49%
1.84%
1.00%
6.32%
2.07% NA
26.00%
2.01%
6.68%
9.00%
5.96%
2.00%

15. Logistics cost/sales by region
Avg
Transport and cargo handling cost (incl. transport packaging)
Luzon
7.78%
Visayas
9.40%
Mindanao
10.93%
Warehousing (cost of running own warehouse or buying the service)
3.94%
3.80%
5.79%
Inventory carrying cost
(incl. cost of capital tied in inventory)
4.17%
9.60%
10.85%
Logistics administration
(10% of above costs)
1.59%
2.28%
2.76%
Total Logistics Cost/Sales
17.48%
25.08%
30.32%

16. Logistics Performance issues
Reliability is the most important logistics performance dimension
The symptoms of low reliability is high logistics cost
Manufacturers consider that reliability of the logistics system in the Philippines need to be improved

17. Overall Logistics Performance
KPIs
Mean
Philippines
Vietnam
Indonesia
Thailand
Delivery In Full On Time
89.62%
90.99%
81.92%
87.84%
Damage rate
3.70%
2.18%
2.01%
4.16%
Cash Conversion Cycle (C2C) days
21.77
20.29
19.00 NA
Customer Complaint Rate
5.97%
6.65%
6.61%
2.64%
Forecasts Accuracy
80.15%
75.53%
81.68%
84.40%
Ratio of Returns
5.15%
2.26%
3.55%
3.58%

18. Sector Comparison vs other ASEAN countries
DIFOT
Philippines
Vietnam
Indonesia
Thailand
Automotive
97.18%
98.00%
83.75%
82.45%
Chemical products
85.71%
100.00%
81.17%
87.57%
Construction materials
81.44%
75.00%
95.58%
86.36%
Electronics
88.05%
80.00%
95.32%
85.36%
Food
88.02%
100%
91.14%
89.41%
Furniture & Decors
96.30% NA
90.22%
86.09%
Jewelry
99.60%
89.64%
Textile & Garments
91.55%
93.75%
90.66%

19. Sector Comparison vs other ASEAN countries
Damage rate
Philippines
Vietnam
Indonesia
Thailand
Automotive
0.28%
0.22%
3.91%
4.31%
Chemical products
2.13%
3.50%
3.23%
3.95%
Construction materials
2.76%
7.50%
1.56%
4.00%
Electronics
2.29%
0.08%
2.10%
4.24%
Food
5.06% NA
2.19%
4.07%
Furniture & Decors
3.26%
3.07%
4.48%
Jewelry
0.88%
Textile & Garments
5.21%
0.50%
4.94%
4.41%

20. Sector Comparison vs other ASEAN countries
C2C (days)
Philippines
Vietnam
Indonesia
Automotive
0.38
22.40
22.42
Chemical products
21.15
33.33
26.00
Construction materials
25.94
4.00
9.10
Electronics
21.71
28.00
27.33
Food
22.10
34.00
17.00
Furniture & Decors
14.50 NA
25.60
Jewelry
38.83
45.00
Textile & Garments
24.55
26.50
32.00

21. Sector Comparison vs other ASEAN countries
Complaint rate
Philippines
Vietnam
Indonesia
Thailand
Automotive
1.95%
3.21%
8.45%
2.79%
Chemical products
5.79%
9.00%
11.82%
2.71%
Construction materials
5.28%
10.00%
3.56%
2.68%
Electronics
9.38%
5.00%
2.70%
2.66%
Food
6.48%
3.85%
2.72%
Furniture & Decors
4.31% NA
6.00%
2.55%
Jewelry
3.75%
1.51%
Textile & Garments
8.62%
7.50%
8.78%
2.51%

22. Sector Comparison vs other ASEAN countries
Forecast Accuracy
Philippines
Vietnam
Indonesia
Thailand
Automotive
87.07%
74.00%
89.50%
82.20%
Chemical products
85.55%
55.00%
83.70%
85.70%
Construction materials
76.87%
87.50%
90.89%
80.90%
Electronics
75.71%
70.00%
85.00%
82.80%
Food
80.61%
88.31%
86.70%
Furniture & Decors
80.00% NA
83.13%
82.00%
Jewelry
88.60%
87.33%
Textile & Garments
70.91%
82.78%
87.90%

23. Sector Comparison vs other ASEAN countries
Return
Philippines
Vietnam
Indonesia
Thailand
Automotive
1.71%
1.40%
5.89%
4.21%
Chemical products
5.27%
2.50%
5.91%
2.36%
Construction materials
2.53%
4.00
1.25%
3.98%
Electronics
3.31%
0.80%
3.19%
Food
7.37%
3.44%
3.00%
Furniture & Decors
4.58% NA
6.50%
4.50%
Jewelry
3.20%
0.83%
Textile & Garments
3.81%
5.00%
5.42%
2.66%

24. Logistics Performance by regions
Average
Average Order Cycle Time (days)
Luzon
29.15
Visayas
27.76
Mindanao
14.83
Transportation Lead Time (days)
10.94
19.16
11.65
Delivery In Full On Time (%)
90.76
83.81
86.46
Damage rate (%)
3.10
5.46
3.96

25. Logistics Performance by regions
Average
Cash Conversion Cycle (C2C) (days)
Luzon
21.93
Visayas
23.60
Mindanao
13.45
Customer Complaint Rate (%)
5.65
8.64
4.46
Forecasts Accuracy (%)
79.88
82.18
80.00
Ratio of Returns (%)
4.90
4.67
7.56

26. Philippines International LPI vs. WB LPI
International logistics
LPI 2016
Score/5
a) The effectiveness of Customs and other authorities in customs services
2.61
3.23
b) The quality of transport and telecommunications infrastructure
2.55
3.34
c) The quality of port infrastructure
3.30
d) The quality of airport infrastructure
e) The quality of road infrastructure
3.19
f) The availability of logistics infrastructure (i.e. warehouse, distribution centres, etc.)
3.58
g) The availability of reliable transport services
3.01
3.66
h) The quality of logistics services and competence of service providers
2.70
3.73
i) Possibility to track and trace shipments
2.86
3.67
j) The probability of shipments arriving at the promised time
3.35
3.49
Average
3.45

27. Philippines International LPI vs. WB LPI International logistics
Score/5
Luzon
Visayas
Mindanao
a) The effectiveness of Customs and other authorities in customs services
2.61
3.33
3.04
3.11
b) The quality of transport and telecommunications infrastructure
2.55
3.36
3.42
c) The quality of port infrastructure
3.24
3.56
3.35
d) The quality of airport infrastructure
3.28
e) The quality of road infrastructure
3.15
f) The availability of logistics infrastructure (i.e. warehouse, distribution centres, etc.)
3.64
3.43
3.55
g) The availability of reliable transport services
3.01
3.76
3.70
h) The quality of logistics services and competence of service providers
2.70
3.80
i) Possibility to track and trace shipments
2.86
3.77
j) The probability of shipments arriving at the promised time
3.62
3.20
Average
3.48
3.44

28. Philippines Domestic LPI vs. WB LPI
Domestic logistics
LPI 2016
Score/5
a) The quality of transport and telecommunications infrastructure
2.61
3.23
b) The quality of port infrastructure
2.55
3.14
c) The quality of airport infrastructure
3.39
d) The quality of road infrastructure
3.02
e) The availability of logistics infrastructure (i.e. warehouse, distribution centres, etc.)
f) The availability of domestic shipping services
3.41
g) The availability of reliable transport services
3.01
3.47
h) The quality of domestic shipping services
2.70
i) The Quality of logistics services and competence of service providers
3.57
j) Possibility to track and trace shipments
2.86
3.37
k) The probability of shipments arriving at the promised time
3.35
3.26
Average
3.34

29. Philippines Domestic LPI vs. WB LPI

30. Developing Logistics Strategy
Documented logistics plan
Strategy development

31. Logistics outsourcing
Most outsourced activities are:
Domestic transport
Domestic freight forwarding
International transport
Customs brokerage
Most in-house activities are:
Warehouse
Inventory management
Logistics IT system
Value-added services
In-house
Outsource
Indonesia
51%
49%
Vietnam
32%
68%

32. Outsourced LSP activities & revenue
Most outsourced logistics activities
Revenue generation

33. Logistics Service Level Agreements (SLAs)
It is interesting to note that not all providers are under SLAs.
More than 1/3 of outsourcing is done with no SLAs.
Only 1/5 respondents have SLAs with all their service providers.

34. Most common performance issues
Customs process is considered the most problematic issue for LSPs
However, congestions and weather issues are also key issues
Need to address issue related to delays in receiving cargo

35. Summary Logistics cost/sales is higher than in other ASEAN countries
Large variations by regions and sectors in terms of performance and cost
Reliability is the dominant logistics performance issue
Outsourcing still focused on traditional logistics activities
Overall logistics performance is perceived higher than the WB’s LPI score and ranking

36. Way forward…
Create awareness related to the importance of a well developed logistics plan
Conduct supply chain studies on best/worse performing sectors
Conduct logistics corridor studies to identify waste in the system
Professionalise the logistics industry and its human resources. Ever changing job requirements
Establish “peer groups” to share logistics best practices
Support more logistics outsourcing with LSP quality assurance scheme
Need to harmonise domestics logistics with international logistic standards

37. If reliability improve, then…
Way forward…
The focus needs to be on assuring the reliability and the removal of uncertainties in the logistics system in the Philippines….
If reliability improve, then…
Manufacturers/LSPs can design and plan more optimized logistics systems and be more competitive
Logistics costs can be reduced
Focus can then move to time based competition