Impact of Infrastructure on Logistics in the Third World Countries - Research Paper Example

Impact of Infrastructure on Logistics in the Third World Countries Shavonta D. Gaynor SHAVONTA D GAYNOR LGMT 636 Research Paper Outline Question: How third world countries Infrastructure have a profound effect on Logistics? Abstract……………………………………………………………………………………………...2 Introduction………………………………………………………………………………………….2 1. Transportation Infrastructure………………………………………………………………..3 I. Port infrastructure ……………………………………………………………...3 II. Canal and water way infrastructure…………………………………………….5 III. Airport infrastructure…………………………………………………………...5 IV. Rail infrastructure………………………………………………………………6 V. Road infrastructure……………………………………………………………..7 VI. Warehousing infrastructure…………………………………………………….8 2. Communications infrastructure……………………………………………………………………8 I. Mail Service …………………………………………………………………....8 II. Telecommunications Services………………………………………………..…9 3. Utilities infrastructure........................................................................................................................9 I. Electricity and Energy Pipelines………………………………………….....…...9 II. Sewer and water………………………………………………………………….10 Conclusion………………………………………………………………………………………….….10 Abstract The paper purpose of this paper is to explore the profound effects of infrastructure in the third world countries to logistics. Access to basic infrastructure services ­ roads, electricity, water, sanitation ­ and the efficient provision of the services, still remain as a key challenge in the elusive focus to cut down the high cost of logistics in third world countries. These services provide not only direct and fundamental benefits, but also have important indirect effects on the living conditions of the population and are key ingredients for economic productive and to enhance competitiveness. Keywords: third world countries, infrastructure, logistics, economic productivity Introduction Infrastructure services are central to individual and economic productivity and the opportunity for advancement. While this is intuitive for water, electricity and telecommunication services, which bring with them the promise of connectivity and higher productivity, it is also true for roads and transport services. Access to markets, jobs, health care and education, is still an issue for the in the third world countries. Over the past 15 years, infrastructure coverage and quality have increased in most parts of Asian and countries. There have been major improvements in access to electricity, water and sanitation, telecommunications, ports, and airports. However, roads have not had much change, but still efforts and resources have been invested to improve the quality of road networks. A number of empirical studies have found that infrastructure has a positive effect on output, especially in developing countries. Returns on infrastructure investments are generally highest during the early stages of development, when infrastructure is scarce and basic networks have not been completed. However, returns tend to fall with development, sometimes sharply. This paper will therefore examine closely the effects on logistics caused by infrastructure in the developing world. 1. Transportation Infrastructure Transportation links together the factors of economic production in a complex web of relationships between producers and consumers. The outcome is commonly a more efficient division of production by an exploitation of geographical comparative advantages, as well as the means to develop economies of scale and scope. The productivity of space, capital and labor has been the core problem facing logistics systems in developing countries as a result of in efficiency in distribution and personal mobility (Sheffi, 2013). Economic growth is increasingly linked with transport developments, namely infrastructures, but also with managerial expertise, which is crucial for logistics. Although transportation is an infrastructure intensive activity, most of the countries in the Central and East Africa lack hard assets which must be supported by an array of soft assets, namely management and information systems that enhance logistic system (David & Stewart, 2010). I. Port Infrastructure Port infrastructure is linked with the early stages of European expansion from the 16th to the 18th centuries, commonly known as the age of exploration (David & Stewart, 2010). They supported the early development of international trade through colonial empires, but were constrained by limited inland access. Asia’s progress on logistics has failed to keep pace with its growth in trade. Developing countries in other regions are now catching up, so faster progress on logistics development will be crucial to sustaining East Asia’s competitive advantages. High logistics costs for East Asian countries derive from poor port infrastructure, underdeveloped transport and logistics services, and slow and costly bureaucratic procedures for dealing with both exported and imported goods through the congested ports. The balance among these three varies among countries, but in each country a complementary approach to address all of them will be needed to produce a sustainable improvement in competitiveness (Sheffi, 2013). The high costs of land access to ports, reinforced by the effects of production agglomeration, have caused an excessive concentration of export-related activities in port cities and essentially restricted the benefits of trade growth to the areas immediately surrounding ports (Mangan, Chandra & Fynes, 2008). If the benefits of trade are to be more widely distributed, the penalties of inaccessibility need to be addressed. Such action could not only stimulate trade-induced growth in currently inaccessible areas, but if successful, this could reduce – and slow – the growth of trade-induced urban congestion and pollution in port cities in the third world countries (Mangan, Chandra & Fynes, 2008). Reduction of port access costs depends on having adequate infrastructure, appropriate vehicles and logistics technology that allows these to be use efficiently (Mangan, Chandra & Fynes, 2008). As container ports expand, it becomes increasingly difficult to accommodate both the added space requirements and the road congestion that results from the high volumes of truck traffic servicing the poorly managed ports. While the depth of the maritime access channel is not a constraint on growth, the urban congestion problems of port growth can often be solved by moving non-maritime port activities inland, closer to the industries that the port serves and to build rail links to avoid generating extra load traffic (Mangan, Chandra & Fynes, 2008). II. Canal and Water way Infrastructure The first stage of the industrial revolution in the late 18th and early 19th centuries was linked with the development of canal systems in Western Europe and North America, mainly to transport heavy goods. This permitted the development of rudimentary and constrained inland distribution along the canals systems. Low tech and old equipment that are commonly used are the reason of high logistics costs and delays (Sheffi, 2013). III. Airport Infrastructure The second half of the 20th century saw the development of global air and telecommunication networks in conjunction with economic globalization. New organizational and managerial forms became possible, especially in the rapidly developing realm of logistics and supply chain management (). Although maritime transportation is the physical lynchpin of globalization, air transportation and IT support the accelerated mobility of passengers, specialized cargoes and their associated information flows (David & Stewart, 2010). Good air freight facilities are important in attracting fast growing, high value-added industries. Hence, competition between airports in developing countries along the East Asia act as a hub for major logistics companies which is growing tremendously, providing services equally or better than the other developed countries (David & Stewart, 2010). The smaller and newer airports have been developed in a number of developing countries offer better services. Most of which are also growing faster than the larger ones; this happens in support of low-cost carriers, by giving an alternative to air travel besides major airlines servicing the various South East Asia air sectors (Sheffi, 2013). Airlines and traditional freight forwarders both compete and cooperate with each other to provide air transport-based freight services. The progress of air freight forwarding and air freight logistics in Malaysia and its neighbors could be compared in favor with that in the U.S. and Europe, while at the same time depending on multinational air carriers for efficient air freight logistics (Sheffi, 2013). IV. Rail Infrastructure This is the second stage of industrial revolution in the 19th century which was linked with the development and implementation of rail systems enabling more flexible and high capacity inland transportation systems. This opened up substantial economic and social opportunities through the extraction of resources, the settlement of regions and the growing mobility of freight and passengers. Because of the inadequacy of an interlinked, exhaustive and all penetrating railway network in a number of developing counties, transport has assumed a pivotal role in the predominantly agrarian economy in some parts of East Africa and India with heavy rural concentration. The history of road– way transport especially in India indicates that the industry went through a rapid growth in the second half of the decade, 1980-1990. This growth resulted in a major shift in logistics as the movement of goods from Railways to roads was fastened. However, the industry is still coping with an inadequate and poor quality of road network. It also suffers from a near absence of technological improvements in the design and manufacture of vehicles (David & Stewart, 2010). V. Road Infrastructure Sub-Saharan Africa is plagued by poor and under-developed transportation infrastructure, limiting accessibility to consumers, hampering intra-regional trade and driving up import and export costs. Southern Africa is the most developed region, from an infrastructure and intra-regional connectivity perspective. Perhaps most notable is the widespread use of rail as a key mode of transport for freight transportation in Southern Africa –an option which is currently heavily under-utilized in the rest of Sub-Saharan Africa (David & Stewart, 2010). East and West Africa are regional growth ‘hotspots’ –from an economic perspective, but also due to the numerous multinational companies targeting these regions for expansion. Compared to Southern Africa, transport and logistics infrastructure in these regions are very poor. The infrastructure has been poorly maintained, resulting in dilapidated and over-congested roads (David & Stewart, 2010). India has one of the largest road networks in the world. The growth rate in road traffic has been 10 percent since 1950 and would have gone higher had there been a larger and penetrative road network. The motor vehicle population has grown from 0.31 million in 1950 to 27.6 million in 1995, marking a 90-fold increase. The road network has expanded from 0.4 million km to 2.95 million km, only a 7-fold increase in terms of length during the same period. It stands at 3.3 million at 1998. However, the upgrading of roads by way of widening of carriage ways, improved surface quality, and strengthening old and weak bridges and culverts has not matched with this phenomenal growth (Sheffi, 2013). VI. Warehousing infrastructure The first stage of the industrial revolution in the late 18th and early 19th centuries was linked with the development of ware house systems in Western Europe and North America, mainly to transport heavy goods. This permitted the development of rudimentary and constrained inland distribution systems. However, there is a recorded of documented proof of inadequate warehouse in a number of developing counties in Africa, that has slows down logistics (Cidell, 2010). 2. Communications Infrastructure Since the beginning of computerization, ICT have assumed supporting role for the organizational functions. During the 80’s, ICT have been more studied as instruments for implementing strategic initiatives (Lai, Ngai, and Cheng, 2005). New ICT are changing the economy and the way business is conducted in various developing countries. The force of ICT firms find new ways to expand the markets in which they compete with major countries, to attract and retain customers by customizing products and services, and to restructure their business strategy to obtain competitive advantage over their superiors (Gratzner and Winiwarter, 2003). I. Mail Service As a result of globalization, many third world countries have employed ICT to raise their service capability in an E-business context according to Mason-Jones and Towill (1999). Sauvage (2003) also defends that the firms have improved their operation efficiency, through the continuous implementation of information or automation technologies according to their business characteristics. There is no doubt that the ICT is playing an important enabling role in logistics (Lai, Ngai, and Cheng, 2005). Several surveys have been conducted to investigate the use and importance of ICT in supporting logistics operations (Hardaker et al  . 1994; Gutiérrez and Durán 1997; Piplani et al . 2004). Firms need to be able to manage information effectively, and to integrate several logistics II. Telecommunications Services The ICT logistics approach embraces the hardware, the software, and the networks investment and the design to facilitate processing and exchange of data (Global Logistics Research Team, 1995). However, the process of ICT adoption could be quite difficult to many firms in the third world countries because of its requirements. The adoption of ICT is usually, associated with a large investment and many of the firms may not have sufficient financial resources to support the high investment in hardware and software technology that is required (Lai et al ., 2005). Another factor that becomes difficult the ICT adoption in the third world countries is the lack of expertise and technical support for implementing ICT (Yeung et al. 2003). ICT infrastructure is listed by only 13% of private sector respondents, which places it among the five least cited factors. In the category of operational difficulties, inadequate trade and transport infrastructure is the third most commonly recognized problem among private sector survey respondents in the third world countries (David & Stewart, 2010). 3. Utilities infrastructure I. Electricity and Energy Pipes Spotty power supply forces occasional brown-outs on local manufacturers, who often have to halt production while local government officials divert whatever power there is to residential areas (David & Stewart, 2010). Demand is growing rapidly, but power rates are capped by a government wary of causing any kind of social unrest, forcing the selling of electricity to be at a loss. Thus, it is no surprise that in recent years the firm has opted to invest in mobile-phone networks and other ventures instead of building power-generating capacities. This is a disincentive to logistics which slows down the movement capabilities. The cost of production is set to continue to rise, which in turns raises the cost of logistics. II. Sewer and Water Poor water infrastructure, which includes irrigation systems, brings undoubted effects on the high cost of logistics. The impact of poor drainage has been identified as costing the rail network some millions of dollars each year in earthworks renewals; additional track maintenance and schedule-8 train delays. Historically drainage was not managed as an asset but dealt with on a reactive basis or through track renewal schemes. Yet drainage performance clearly impacts significantly on track quality, which in turn reduces the operating speed of rolling stock, ultimately delaying trains. Drainage may also cause earth-slips and flooding, affect track geometry, and even lead to derailments (David & Stewart, 2010). Conclusion By having adequate ‘hard’ and ‘soft’ infrastructures, the third world countries will be able to increase the level of competition and grow their logistics service providers to increase economic productivity. However, as easy as it may sound, the logistics scenario in many third worl counties will still face numerous other challenges with poor and old infrastructure that has increased the cost of logistics and lowered economic productivity. Contact me at denjax54@gmail.com for an alternative paper for comparison and more top notch papers. References Cidell, J. (2010) Moving places: the Geography of Warehousing in the US, Journal of Transport Geography, 18 (3), 363–71 David, P., & Stewart, R. (2010). International logistics. (3rd ed.). Mason, OH 45040: Cengage Learning Lai, Kee-Hung; Ngai, E and Cheng, T. (2005). Information Technology Adoption in HongKongs Logistics Industry, Transportation Journal, 44 (4), 1-10 Mangan, J., Chandra, L & Fynes, B. (2008) Port-centric logistics, International Journal of Logistics Management, Vol.19(1), 29-41 Mason-Jones, R. & Towill, D. R. (1999). Using the information decoupling point to improve supply chain performance. 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