Comparison of Asian and European logistics systems.

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Comparison of Asian and European logistics systems

James H. Bookbinder, Chris S. Tan

James H. Bookbinder, Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada

Chris S. Tan, Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada

This work was partially supported by the Natural Sciences and Engineering Research Council of Canada, grant No. OGP 05292.

This research compares the logistics systems of Asia and Europe and categorises them into distinct levels of logistics excellence. First, the context in Asia and in Europe is summarized. Then, attributes of a world-class logistics system are proposed. By applying cluster analysis to data from authoritative sources, we objectively segregate European and Asian logistics systems into three logistics tiers. There are several surprises, the main one being that the UK is classified Tier 2 (not as favourable as Tier 1). A prioritized set of attributes that the UK could improve on to qualify for the Tier 1 group is suggested. Sensitivity analyses are conducted to determine changes to the classifications. After finding that the top-ranking logistics systems of Europe and Asia are from Denmark and Singapore, respectively, those two countries are studied in detail to draw logistics lessons applicable elsewhere.

Article type: Comparative/evaluators.

Keywords: Asia, Europe, Logistics, Supply-chain management.

Content Indicators: Research Implications** Practice Implications** Originality** Readability*

International Journal of Physical Distribution & Logistics Management
Volume 33 Number 1 2003 pp. 36-58
Copyright © MCB University Press ISSN 0960-0035

Introduction

Asia () is quite diverse but can be divided along economic lines. There are first the industrialized economies of Hong Kong, South Korea, Singapore and Taiwan[1]; five developing countries (China, Indonesia, Malaysia, The Philippines, and Thailand) as a second set; and a third division comprising about 35 other nations. South Korea was the industrialized economy most affected by the Asian financial crisis of the late 1990s.

Within Europe (), on the other hand, the European Union (EU) is a borderless, powerful economic community whose combined economies already exceed those of the countries in North American Free Trade Agreement. European integration has created new opportunities and also new issues in supply chain management.

In light of the above, the key aims of this research are threefold:

(1) To compare the logistics systems of Asia and Europe and classify them into different logistics tiers, i.e. distinct levels of excellence.

(2) To introduce a process that government policy makers can employ to improve their logistics systems.

(3) To draw lessons from the top logistics systems of each region.

Our research will suggest some key factors that contribute to logistics excellence. We will also demonstrate, by sensitivity analysis, that attaining the top logistics tier is not insurmountable. But let us begin by summarizing the context in Asia and in Europe.

Social, economic and geographical overview of Asia and Europe

The Asian economic crisis, triggered when the Thai currency, the baht, was floated in July of 1997, produced a domino effect on the economies of South Korea, Indonesia, and Malaysia. During the panic-pullout of funds by global investment managers, it became clear that most Westerners viewed Asia as a homogeneous bloc! Economic fundamentals of Singapore, Hong Kong and Taiwan were basically sound, but funds were moved out of those countries[2] as well.

In reality, Asia is a wide collection of almost 50 diverse countries; more than 25 languages and 700 dialects are spoken there. With China, India and Indonesia, Asia houses three of the world's four most populous nations. Asia consists of 24,000 separate land masses, spanning six time zones and occupying 45 million km2. The study of logistics, or any subject about Asia, must recognize her heterogeneous nature.

After the former Soviet Union broke up, Europe became a continent of 42 nations, comprising the EU (15 countries)[3], the Commonwealth of Independent States (the CIS, 12) and Eastern Europe (15 countries). Western Europe[4] is of course more affluent and economically developed than the eastern side. Unlike North America, but like Asia, Europe is highly diverse in cultures and languages.

Literature review

Research literature on international logistics has heavily emphasised the USA and Japan (Babbar and Prasad, 1998). Those countries were followed by the UK, Australia and Canada in the 141 research articles they screened. North America led in quantity, then Europe, and finally the Asia Pacific, but logistics in the latter is usually discussed on a piecemeal basis.

For example, McMullan's (1996) paper on Asia Pacific logistics dealt mostly with Australia, while in Pollitt (1998), China and Japan were taken as representative of "Far East" logistics. Those two countries exhibit market and economic clout in Asia, but one cannot ignore Hong Kong, Taiwan, Singapore and Korea. Hong Kong and Singapore intuitively possess logistics infrastructure and expertise matching North America and the advanced economies of Europe. Korea, despite its low ranking by the World Competitiveness Yearbook, is home to Pusan, the world's 4th busiest port (Freight & Trading Weekly, 1999).

There is a more complete and extensive treatment of business logistics in Europe as a bloc. Stock and Lambert (2001, Ch. 14) outlined the impact of the EU and break-up of the Soviet Union on logistics practice across Europe. A few articles are case-studies of real companies, documenting the application of logistical techniques in Europe: Leeuw (1996) outlined a methodology to select control techniques in physical distribution; Bagchi and Virum (1998) analysed the effect of logistics alliances; and Lumsden et al. (1999) examined possible improvements to the hub-and-spoke distribution network of SKF Europe. Laarhoven et al. (2000) conducted a survey of logistics outsourcing in Sweden, the UK and elsewhere. But overall, no division of logistics into different tiers of professionalism is apparent.

Wright (1998) provided a more rounded description of Asian logistics. Common misconceptions, the varying degrees of supply chain maturity, as well as logistics challenges are addressed. However, this brief article could not deal with regulatory requirements or the infrastructure for transportation, warehousing, communications and information technology. Chen (1999) and Goh and Ang (2000) filled in some details. The former paper concerns customs regulations in ASEAN[5]; the latter examined logistics infrastructure in Indochina.

Finally, almost no literature compares logistical networks and infrastructure in Europe and Asia. The closest, Sohal et al. (1999), contrasted the adoption of quality management practices in the logistics function amongst Australian, North American and European firms. Further afield, Ulengin et al. (2002) classified countries according to their overall macroeconomic competitiveness.

Organization of this article

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Our paper attempts to fill the gaps identified in the review of existing literature. A summary of logistics in Asia and Europe appears in the following section, where we discuss the impact of economic, political and infrastructure issues on logistics. Next, our third section concerns attributes of a world-class logistics system. We propose and apply a methodology (cluster analysis) to objectively classify 33 countries from Asia and Europe into three logistics tiers. Sensitivity analysis is employed to show how a country could improve its standing by focussing on logistical aspects in recommended order of priority. In the fourth section, we ...

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