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Delays and Unpredictability Matter More than Transport Costs for Development

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the same automobile company, the inventory level equaled 7 days of sales for the branch located in Italy, but 35 days of sales for the branch located in Morocco. Another way of managing risk is through altering modal choices. Arnold (2006) found that garment producers in Bangladesh shipped up to 10 percent of their production by air to meet the delivery schedule. The perception of shippers and operators is also reflected in the way public and private stakeholders use statistics, especially when addressing “efficient” shippers’ needs. Right or not, public agencies and terminal operators have a natural tendency to allocate the responsibility for long delays to the users or their agents and tend to dismiss the tail of the distribution (very long lead time) as nonrepresentative. These stakeholders will use lead-time indicators close to the median, or even the mode, to benchmark their own efficiency when dealing with efficient operators. A contrario, quality-driven shippers or, similarly, efficient freight forwarders will take into account the probability of late shipments to assess the inventory or opportunity cost (for the shipper) or to propose a guaranteed arrival schedule (for the agent). For them, the relevant indicator is not the mean but rather the 95th or 99th percentile lead time, and exporters will likely be more demanding than importers. As already described in Chapter 3, the time used to calculate the inventory, T(g), will differ dramatically depending on the user’s requirements. In an uncertain environment, this value can differ enormously between a relatively nonsensitive shipper and one with high requirements. Based on the sample data collected in ports and on some large samples of corridor trips, we can assert that switching the time used to calculate inventory from the median to the 95th percentile translates into a twofold (relatively certain environment with a limited standard deviation of lead time) to a fivefold difference (very uncertain environment). However, in a context where a shipper, even when paying more, cannot gain certainty in transit time, the only thing it can do is to cover itself through large inventories.12

The Trade-off between Cost and Reliability Exporters tend to optimize their supply chain according to the trade-off between cost and reliability. Malawi, which is a small landlocked economy, provides a good example. Malawi mainly exports tobacco, sugar, tea, cotton, and garments. The country is served by four corridors to the sea, each with advantages and disadvantages, attracting different traders depending on their requirements and on transport prices (table 4.3). Although trading

The Cost of Being Landlocked  

This book proposes a new analytical framework to interpret and model the constraints faced by logistics chains in landlocked countries. The...

The Cost of Being Landlocked  

This book proposes a new analytical framework to interpret and model the constraints faced by logistics chains in landlocked countries. The...