Enhancing logistics performance measurement: an effectiveness-based hierarchical data envelopment analysis approach

Abstract

The logistics performance index (LPI) is a comprehensive and comparable composite index developed by the World Bank to assess a country's logistics and trade facilitation environment. However, the existing LPI relies on externally assigned weights. To enhance LPI scores, this study adopts an effectiveness-based hierarchical data envelopment analysis method that internally allocates objective weights based on the dataset. Such endogenous weight information can provide additional valuable insights for countries to prioritize and strategize efforts to enhance their performance in the future. The results of this study indicate that focusing on improving the policy category yields greater benefits than improving the service category in terms of ranking national logistics performance. Furthermore, this study finds that logistics performance is influenced by income levels and geographical area. Income levels impact the regulatory and trade facilitation environment, with varying income levels leading to different priority policy areas. Geographical location also plays a crucial role in regional economic integration and trade facilitation. A favorable geographical location reduces costs and time while enhancing supply chain predictability and reliability. It is hoped that this study serves as a valuable resource for countries in identifying optimization strategies to improve their logistics performance.