Facilitating business logistics -- key to sustainability

From the analysis of World Bank it is seen that because of inadequate logistics arrangement cost of production increases from 4 to 48 per cent which is one of the constraints for Bangladeshi products to enter into the Global Value Chain (GVC). In a recent study of the World Bank it is seen that those companies which are able to integrate themselves in the global value chain is doing better in export diversification and making their business sustainable.

The Eight Five-Year Plan (8FYP) has targeted tax-GDP ratio to 14.2 per cent by 2025, experts believe it needs to be increased to at least 16-20 per cent, which is far away from the present level of only 8-10 per cent. However, NBR announced that if the exemption is counted, the Tax-GDP ratio would be much higher-- close to 16 per cent. Nevertheless, one of the idyllic way to increase the ratio is to reduce cost of doing business. Businesses are suffering because of high cost of business, one of them is soaring logistics cost. Logistics encompasses expenses relating to a product starting from sourcing raw materials to delivering customer orders and every step in between. As per several international statistics logistics cost is one of the highest in Bangladesh.

As per Logistics performance Index, 2018, Bangladesh occupied 100th position, while Germany is in the first position, Sweden 2nd, Belgium 3rd, Ireland 29th, Malaysia 41th, India 44th and Philippines 60th.. Bangladesh is going to be a developing country soon, it needs to give serious attention in improving its logistics management capability. In business, success in logistics translates to increased efficiencies, lower costs, higher production rates, better inventory control, smarter use of warehouse space, increased customer and supplier satisfaction, and improved customer experience.

Global 3PL Market Size Estimators 2020 analysed cost of logistics as a percentage of GDP. In Bangladesh businesses have to incur 15.6 per cent, while it is 8.1 per cent in Germany, 13 per cent in India and Philippines. Bangladesh needs to have a clear target to reduce logistics cost 13 per cent by 2028, 12 per cent by 2030. For this an integrated logistics development plan has to be framed. Bangladesh's logistics sector is heavily fragmented and there are about twenty Ministries/Agencies/Offices looking after different areas of logistics; we do not know which is the parent Ministry. In India they have announced a logistics division in the department of Commerce and planned to create an IT backbone to bring all stakeholders providing logistics services together.

Logistics expenses is associated to packages, transport, storage and many other related issues. Therefore, analysing industry operations and making processes more efficient to reduce a company's costs should be one of the key priorities. When business will be less costly, income will increase and companies will comfortably be able to pay taxes.

A rough estimate of investment in the logistics sector shows that about US$ 300 billion investment is required during 2021-2030 and should be raised to about 6-7 per cent of GDP from present level of around 3-6 per cent . There is a need for attracting domestic and foreign investment in this sector by providing attractive facilities as has been done in case of power sector.

We are entering into the age of 4IR where the manufacturing will have to redefine on how to interact with customers, and structured supply chain. Now technology is the main vehicle for redefining every element of global supply chain starting from manufacturing to shipping, warehousing, collaboration and eventually customer satisfaction. A lot more work needs to be done in these respects. Modernisation in all aspects of logistics such as communication, shipping, standardisation of container services through updated technologies through digital connectivity and Internet of Things (IOT). Countries are independently calculating their cost for modernisation towards increasing efficiencies otherwise integration with global business will be difficult.

In view of this policies need to be updated, restrictions on investment would need to be withdrawn as foreign investment in these sector is very much required. Development of container depot and container freight station, courier services, clearing and forwarding services, private warehousing services, temperature controlled logistics, shipping transport and communication, warehousing etc are much areas in need of improvement.

A time-bound logistics policy is another primary requirement for which BUILD in association with other concerned has started working in collaboration with the PMO. Support from all related ministries/agencies/offices are required so that strategies for improvement of rail, road, waterways and development of logistics sub sectors are also in place, at the same time private sector should also be vocal in raising their requirements so that an effective logistics policy can be framed.

Ferdaus Ara Begum, CEO, BUILD-a Public Private Partnership Platform working for private sector development. [email protected]