Logistics Policy Bottlenecks

Logistics Policy Bottlenecks

An approach to logistics policies is to mitigate critical bottlenecks. Because bottlenecks occur at specific locations or jurisdictions (such as a port authority) and over a specific function (e.g. customs clearance), they involve challenges that can be identified and mitigated, therefore promoting logistics performance. They represent key areas (in a geographical and functional sense) of investment and policy intervention involving different stakeholders and levels of government.

  • Capacity bottlenecks. The lack of transport infrastructure investment in response to international trade growth (or in anticipation of trade growth) is a common issue, particularly in developing economies. Like most transport networks, congestion tends to be specific to some locations like access to a key terminal facility or strategic road intersections. This leads to opportunities to identify these bottlenecks and provide additional capacity. The port has been a recurring capacity bottleneck, particularly in developing economies. The most common issues concerning port capacity bottlenecks are insufficient port facilities, the inability of port infrastructure to keep up with the demand, or in some cases, there is sufficient port capacity, but the lack of effective connectors to the hinterland. Connectors are a particularly salient issue. The focus on the development of road infrastructure is leading to more reliable inland accessibility, but this is only one component of a more comprehensive infrastructure strategy. Rail transportation, particularly intermodal, offers high capacity connectors, but require substantial investments in infrastructure and stable volumes. With a few exceptions (e.g. North America), rail networks tend to be geographically fragmented and focusing on traditional sectors such as natural resources and their exports. The lack of intermodal and/ co-modal vision in the development of infrastructure is likely to create capacity bottlenecks as trade volumes grow and as hinterland logistics become more sensitive to capacity and reliability issues.
  • Operational bottlenecks. A gap between the increasingly stringent logistical requirements of the private sector seeking the optimization of its supply chains and the capabilities of infrastructure, service providers (e.g. transport, warehousing, customs brokerage), and public policy to cope with these requirements. This is particularly the case in sectors that involve time-sensitive planning of production and distribution such as the automotive industry and perishable products (cold chain). There are operational performance standards in terms of time and reliability that need to be met. Ports having operational limitations (e.g. crane movements, yard management, and gate operations) impose bottlenecks on the supply chains they service through additional costs and delays. Efficient port management and operation is underlined as a core factor of logistical performance.
  • Institutional bottlenecks. The institutional setting and mindset are often creating a bottleneck in the development of logistics activities. Institutions are often ill-prepared to cope with the requirements of supply chains, global firms, private entrepreneurs, and foreign investments. National institutional attention tends to focus on trade facilitation but usually overlook the logistical challenges they may create, such as improved performance requirements. Freight logistics are not part of national strategy or policy, which is reflected in public sector visions that are generally unimodal or focusing on a single large project (known as the silo effect). This often reflects a lack of coordination and cooperation among institutions having an oversight on elements of transport and logistics chains.
  • Skills bottlenecks. The lack of training and qualification of the labor force is a recurring issue that impairs the growth of logistics. Logistics employment opportunities involve a wide range of functions and skills that are often not provided by available technical training programs. Although many firms provide on the job training, the possibility to tap a more qualified labor pool and establish partnerships with local educational institutions is a common strategy benefiting both the private and public sectors.