International Logistics: First World Countries vs. Developing States

Abstract

International logistics is a very important economic phenomenon in the modern world. The paper compares logistic systems of the First World countries with the ones of the developing states and makes the following conclusions: (1) the countries with the emerging economies possess weak and imperfect logistic infrastructure; (2) logistics companies are too dependent on the governments, or the states, in general, are dependent on the requirements of their more developed neighbors; (3) lack of skillful logistics specialists and inability to adapt the advanced logistic technologies limit the potential of the logistics industry’s development; (4) environmental considerations complicate logistics decisions in all countries.

The enumerated problems do not mean that international logistics will always stay at the primitive level in the developing countries. They can make some steps to correct the existing situation, namely establish alliances and unions of free trade with each other and developed countries, invest into renovating their infrastructure, attract more skillful logistics managers, and educate their own employees. Moreover, environmental consideration should become one of the foundations of all logistics planning and calculations.

First World Countries vs. Developing States

Modern economics cannot exist without business operations. Different transactions and movements of goods generate continuous cash flows. Any business entity that sells goods understands the importance of choosing the correct carrier. Delivering products from one destination to another is not a simple process. It comprises many stages of how to make this operation safe and effective for the company. The development of all these stages is covered by logistics. Due to globalization of the modern world, the concept of “international logistics” is worth special attention. This paper researches the differences which exist in logistics of the First World countries and developing states and offers some solutions to the future challenges determined for the second group.

International Logistics, Its Activities, and Support

Before comparing international logistics in different parts of the world, it is important to define what international logistics is and why it is supported by different states. There exist many definitions of logistics, and one of them is that “logistics is the organized movement of materials, information, and sometimes, people. Logistics implies that many separate, related activities are undertaken and are coordinated” (Wood, Barone, Murphy & Wardlow, 2012, p.246). As it was stated in the introduction, logistics is not a simple delivery of goods from one point to another, but it consists of a number of activities, namely materials and inventory management, transportation, arrangement of distribution centers, interplant movements, and others (Wood et al., 2012). This information strengthens the importance of logistics for any company, especially when reaching the international level.

Nowadays, the scholars and economists actively discuss globalization and the increased speed of business operations. It is logical that international logistics also develops and is supported from different directions. Wood et al. (2012) distinguish the following forms of supporting international logistics:

1. Government: all governments recognize that it is very important for the states to produce more than they can consume and export more in order to support the trade balance. This fact is the reason why any government facilitates the conditions for international logistics operations. The only obstacle to this support is national defense concerns arising because of the terrorist attacks.

2. Technology: there are many transfers and substitutions of usual logistics equipment, mainly transport, by the machines used previously for military purposes (lorries, helicopters, trucks, and others).

3. Trade unions: there are many trade unions, created by the states to establish profitable tariffs for exports and free trade zones. Therefore, international logistics has a deep foundation and much freedom for development.

However, the process of movement of goods from abroad cannot pass uncontrolled. The governments also establish some regulations to determine which products are safe to be imported and which files of information can be transferred freely (Wood et al., 2012). Another important obstacle created for international logistics is the so-called boycotts and anti-boycotts (Wood et al., 2012). Some governments sometimes boycott other governments and do not accept the products of the corresponding countries. Moreover, customer-based boycotts are also possible when consumers protest strongly against certain exports. A well-known boycott was started by many Arab countries against Israel products. It is also important to note that governments sometimes impose import restrictions on certain products for some economic purposes (Wood et al., 2012). Thus, certain limitations for international trade and logistics exist, but they are not so influential for the development of the sphere as new opportunities which appear every day.

International Logistics in the First World Countries

Though commerce and logistics develop actively in almost all parts of the world, the developed or First World countries have the biggest potential to perform different logistics operations. These countries possess very good infrastructures, resources, and technologies in order to perform different operations (Wood et al., 2012). Speaking about the First World countries, Wood et al. (2012) mean mostly the United States, Japan, Canada, and some members of the European Union. The first distinguishing feature of international logistics of these countries is the fact that they share the best experiences (e.g. customer-oriented logistics or outsourcing) with each other and easily adopt them. The example given by Wood et al. (2012) is Toyota Company, which has its biggest market in the United States due to a close cooperation of the countries (Wood et al., 2012). Therefore, the first positive factor creating high-quality logistics operations in the developed countries includes close cooperation, globalization, and a desire for mutual development.

The second important characteristic which makes logistics of the mentioned countries effective is infrastructure. The United States, Canada, and Japan have developed systems of high-quality highways. It is worth noting that highways in some European countries are narrower than in the indicated states because of certain construction traditions which existed there for many centuries. However, the states have found the solutions for this problem and choose the carriers with smaller vehicles (Wood et al., 2012). Moreover, this detail made it possible to use multimodal shipments by mainly combining containers from Japan and the United States with rails of the European Union (Wood et al., 2015). Containers are popular transportation means for logistics between the United States, Canada, or Japan and the European Union. Baskar and Pragadeeswaran (2013) state that “Nowadays, containerisation is the increasingly popular method of shipment of the export consignments. The advantages of containerisation are clear: better protection, cheaper packaging, easier handling, and door-to-door delivery” (p. 2898). Therefore, the second secret of success of international logistics of the First World countries implies developed infrastructure and active use of containers.

The next parameter which should be given special attention is logistics performance of the First World countries. Wood et al. (2012) write that the expectations and requirements of the customers all over the world are similar – they want timely and safe delivery of their goods. This fact is the reason why the performance of all logistics activities described in the first section of the paper is the best for all developed countries (Wood et al., 2012). An important contribution to the development of international logistics was made by the advancements of the information technology. Nowadays, Spanish logistics managers have the same access to retail store point-of-sale data as the American ones (Wood et al., 2012). However, there are some barriers created for international logistics in this aspect. To illustrate, the United States uses the Universal Product Code as means of bar coding for its products. However, the European Union countries use another coding system. As a result, additional translations of bar codes should be made to avoid problems (Wood et al., 2012). The quality of logistics operations in the developed countries is very high, and they should only consider an opportunity to develop a single system of bar coding for the products.

It has been already noted that trade unions are important for the development of international logistics. It is logical that all the countries regardless of the level of their economic development are ready to form such unions for facilitation of international logistics operations. However the developed countries are the most successful in this aspect. The European Union and NAFTA (North American Free Trade Association) were named by Rushton, Croucher and Baker (2014) as the most powerful of them. Rushton et al. (2015) state that “they have been a major influence on the structure of distribution and logistics systems throughout Europe and the rest of the world, as trade barriers have broken down and new transport networks have been initiated” (p.345). The dependence of the First World countries from each other is fruitful in terms of logistics.

People have always been important for any business which cannot be fully automatized. This statement can be applied to international logistics offered by the First World countries. Logistics managers become more sophisticated, experienced, and quick in performing the most complicated logistics operations (Wood et al., 2012). Wood et al. (2012) state that “one encouraging trend has been the spread of logistics professional education

and training programs throughout the First World” (p. 61). It is possible to state that from a logistical point of view, the international trade and logistics chains are actively developing in the First World countries, and there are many bright perspectives for these countries. They managed to overcome cultural barriers and financial obstacles on their way to developed international logistics.

International Logistics in the Developing Countries

The logistics systems of the emerging countries are also at the stage of development in the same way as their economies. Russia, Brazil, Taiwan, China, Thailand, Indonesia, and some new market economies of Eastern Europe belong to this group (Wood et al., 2012). These states have some common characteristics, which influence the development of their logistics systems: “Each enjoys a rapid pace of industrialization, high levels of literacy and training, but comparatively low (though quickly rising) per-capita incomes” (Wood et al., 2012, p.61). Compared with developed countries, these states still pursue the company-oriented logistics strategy, not the consumer-oriented approach. The development of logistics system is very slow because these states do not have developed infrastructures (Wood et al., 2012). This fact is the first reason why the logistics of the emerging countries is not developed.

It is important to note that developing countries recognize how important it is to improve their logistics; thus, they try to adapt the latest technologies of the First World within their territories. However, this option is doubtful since for some territories, the advanced internet and communication technologies cannot effectively work because of the lack of educated employees and sufficient resources (Wood et al., 2012). If the countries are the members of some trade unions, they could possibly ask for some support. However, Behar, Manners, and Nelson (2013) correctly note that many developing countries remain isolated because they do not offer all necessary conditions to be united with developed countries, and their international trade significantly suffers. Non-membership in the most influential free trade unions interferes with international logistics of the developing countries.

The next cause of the problems related to logistical systems of the developing countries refers to the fact that the owners of the companies in these countries and the corporations which try to enter the markets feel close interconnections with the governments of the states (Wood et al., 2012). They can offer the government to develop infrastructure and to build airports or railroads, thus receiving mutual benefits – a more developed logistics system and a new infrastructure to be used for different purposes. However, the issue is not as simple as it seems. Any government, if it does not see the benefits for the country in the spheres other than logistics, can simply forbid the company’s activities (Wood et al., 2012). This principle does not function in the First World countries.

Due to the differences existing between the logistics systems of the developed countries and the ones of the emerging states, new notions appear in economics. One of them is the concept of an “economic stepchild” (Wood et al., 2012). It refers to the phenomenon when the economy and logistics system of a developing state are completely dependent on some First World states. Wood et al. (2012) give a good example to prove this statement: “Eighty percent of the foreign direct investment in the Czech Republic has been supplied by German companies” (p. 64). Therefore, any decisions which are made by the Czech Republic in terms of logistics should be coordinated with the German government. It is possible to conclude that there are more serious obstacles for logistics development in the conditions of the states having the emerging economies than for the First World countries. However, this fact does not mean that nothing can be done with this situation.

Possible Logistical Solutions

All countries in the world are interconnected in some way. The development of international trade and logistics is a common task, which can be solved by applying a number of strategies. First of all, it is worth analyzing the results of the research of Behar, Manners, and Nelson (2013) who have examined the export elasticity of different countries and made a conclusion that the level of elasticity is also low for small states. The costs of improving logistics systems in these countries are also low. Behar, Manners, and Nelson (2013) write that “Upgrading international logistics for the whole of Brazil requires far more resources than upgrading it in Rwanda” (p. 26). This fact does not mean that big countries which have problems in logistics should be abandoned. However, it is possible to help improve logistics for small states first, as this process will be easier and quicker.

When evaluating the state of logistics in any country, it is important to apply one single system. The relative research was performed by Huang, Bulut, Duru, and Yoshida (2012). They used the quality function deployment (QFD) method to study logistics of some Asian countries. Some possible recommendations distinguished by the authors are as follows: (1) “enlarging the overall service coverage and analyzing cost performance of specific logistics functions such as order processing, transportation, warehousing will contribute to the diversified service options and decrease the total operating cost” (p. 44); (2) it is necessary to implement single ISO standards to improve the quality of the performed logistics activities; (3) any logistics company should concentrate on the requirements of the individual customers and perform one-to-one marketing (Huang et al., 202). If the governments and heads of logistics companies of the developing states follow these recommendations, they can achieve good results.

Another direction of development in the emerging economies is education. It is important to make logistics managers of the corresponding states as educated as the employees of the developed countries. They should be skillful and think analytically (Wood et al., 2012). They need these abilities to reconsider the distribution networks and supply chains in the developing countries. The ideas of optimization of supply chains of one level and two levels are developed by Creazza, Dallari, and Rossi (2012). The authors believe that the topographical features of supply chains and their configurations are given special importance by the internationally competing companies. Creazza, Dallari, and Rossi (2012) write that “by optimising its supply chain configuration in terms of optimal location of its distribution centres, the company was able to minimize supply chain costs while satisfying service level requirements in different scenarios” (p. 4). Thus, financing logistical education in developing countries is very important.

The last but not the least important issue in the list of recommendations for the developing countries in terms of the improvement of their logistics systems includes satisfying the demands of environmentalists. Rushton et al. (2014) write that the aspects which concern environmentalists in the issue of logistics in both the developed and developing countries include “health and safety issues such as noise levels, the handling of dangerous substances and occurrences, as well as risk assessments and safe systems of work” (p. 586). Recycling of packages is also widely discussed here (Wood et al., 2012). Dekker, Bloemhof, and Mallidis (2012) have researched the challenges which “green” logistics face in all countries and offered a vast framework including all logistic layers and nods. The authors suppose that it is important to consider every aspect of a supply chain to avoid environmentalists’ protests. First of all, it is important for all countries to choose the correct mode of delivery based not only on the costs of the equipment and fuel, but also on the level of emissions. Dekker, Bloemhof, and Mallidis (2012) came to a conclusion that “ship emissions will surpass total emissions generated by all land?based mobile, stationary, and other sources by 2020, unless drastic measures are taken” (p. 5). Secondly, it is important to make an environmentally-friendly choice of the products (with the lowest level of emissions involved in the process of production) and their inventory (where, on what conditions, and how long the goods will be stored) (Dekker, Bloemhof, & Mallidis, 2012). Transport speed, location of facilities, energy spent on transportation, and a form of packaging should be all taken into consideration in the process of developing logistics network (Dekker, Bloemhof, & Mallidis, 2012). The developing countries should pay special attention to “green” logistics because if compared with the First World states, they are not so progressive in this aspect.

Conclusion and Recommendations

To conclude, it is important to note that the sphere of international logistics is very important for modern business. It will continue to rapidly develop and to create new opportunities for performing successful business operations, unite different states with common interests, and create more working positions for skillful specialists. Not all countries have equally developed logistics systems. The developing states should follow the example of the First World and build effective infrastructures, become independent from the influence of the governmental interests of more progressive countries, and increase the educational level of their logistics managers. Hopefully, the intentions of these states will be supported by the First World countries, which are also interested in expanding their markets and establishing international economic connections.