Logistics Performance Index 2023 – Meaning, importance, score

The World Bank recently released the latest Logistics Performance Index. This index scrutinises the logistics sector of different countries and ranks them based on certain parameters of performance. This global Logistics Performance Index released by the World Bank indicates logistics ease across different countries of the world. This functions as an important dataset for importers and exporters of the world.

What is Logistics Performance Index and what does it signify?

According to the World Bank, “The LPI (Logistics Performance Index) is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance.”

This statement means that the index ranks countries according to their logistics performance based on factors like consignment tracking and provides a rating for each criterion. This rating helps countries identify logistics challenges and solve problems.

Here are the six parameters that LPI ranking is based on:

1. The efficiency of customs and border management clearance rated from 1 (very low) to 5 (very high)
2. The quality of trade and transport infrastructure rated from 1 (very low) to 5 (very high)
3. The ease of arranging competitively shipments rated from 1 (very difficult) to 5 (very easy)
4. The competence and quality of logistics services rated from 1 (very low) to 5 (very high)
5. The ability to track and trace consignments rated from 1 (very low) to 5 (very high)
6. The frequency with which the shipments reach the consignees within scheduled or expected delivery times rated from 1 (hardly ever) to 5 (nearly always)

The overall LPI score is based on these six core criteria.

Global logistics performance index

The global logistics performance index ranking was announced by the World Bank is based on two parameters:

1. International LPI

The World Bank conducted a worldwide survey of international logistics operators on the ground including global freight forwarders and express carriers. These professionals answered questions that judged the logistics “friendliness” of the countries with which they trade. For example: logistics performance of India would have been judged by an exporter/logistics professional from another country who has logistics operations in India.

The International LPI 2023 did comparisons across 139 countries.

2. Supply chain tracking data

The second component of the LPI served as a supplemental material to the data from survey responses. The World Bank collected granular level data on maritime shipping and container tracking, postal and air freight activities of countries being surveyed.

This means that the LPI for 2023 is based on two different perspectives; “one based on the perceptions of international logistics professionals assessing their partner countries, the other one measuring the actual speed of global trade by using actual supply chain tracking information.”

Let us have a look at the countries that are in the top ten places of the logistics performance index ranking:

Country	LPI rank
Singapore	1
Finland	2
Denmark	3
Germany	3
Netherlands	3
Switzerland	3
Austria	7
Belgium	7
Canada	7

India’s Logistics Performance Index

India is elated with the 2023 LPI. It rose from Rank 44 in 2018 to Rank 38 in 2023 amid 138 nations. The World Bank reports LPI every two years, and the last report was published in 2018. The international institution skipped the report in 2020 on account of COVID-19.

Have a look at how India score against various logistics performance indicators set by the World Bank. The score is rated on a scale of 1 to 5, 5 being the highest:

Overall LPI rank and score:

LPI rank	LPI score
38	3.4

 

Customs:

Customs rank	Customs score
47	3

 

Infrastructure

Infrastructure rank	Infrastructure score
47	3.2

 

International shipments

International shipments rank	International shipments score
22	3.5

 

Logistics competence

Logistics competence rank	Logistics competence score
22	3.5

 

Tracking & tracing

Tracking & tracing rank	Tracking & tracing score
41	3.4

 

Timeliness

Timeliness rank	Timeliness score
35	3.6

 

How India increased its ranking in the logistics performance index?

India has made a headway in four out of six key metrics for the logistics performance analysis. The government has credited this achievement to the PM Gati Shakti scheme and National Logistics Policy. These policies have proven beneficial to the key logistics activities of India.

• PM Gati Shakti scheme

The Gati Shakti scheme is a National Master Plan for multi-modal connectivity that aims to improve coordination in planning and execution of infrastructure projects to bring down logistics costs.

Here are few benefits of the scheme:

• Increased cargo handling capacity and reduced turnaround time at ports to boost trade.
• Plans to build 11 industrial corridors and two new defence corridors – one in Tamil Nadu and other in Uttar Pradesh.
• Plans to extend 4G connectivity to all villages.

 

• National logistics policy

The National Logistics Policy’s aims to create a strong, cost-effective, technologically enabled and integrated logistics ecosystem in the country. Here are the major steps taken under this policy:

• Unified Logistics Interface Platform (ULIP) for shorter and smoother cargo movement and real-time data updates.
• Integrated digital logistics systems (IDS) for digital integration of different systems of transport-related departments including road transport, railways, aviation, commerce ministries and foreign trade.
• Ease of Logistics (ELOG) to ensure the smooth operation of logistics businesses through transparency and accessibility.
• System improvement group to oversee all logistics-related projects regularly.

 

The government of India is also planning to build logistics parks, large swathes of land where multiple companies come together and handle the logistics part of their businesses. These parks are designed to be well connected to major roads and railway stations. With the complete development of logistics parks, India is hoping to decrease logistics expenses from 14% of the GDP to 8%.