Measuring the relative importance of the logistics performance index indicators using Best Worst Method

Abstract

Globalization has led to an increased need for international freight transportation and, with it, international logistics. To measure the performance of countries in terms of logistics, in 2007 the World Bank created the Logistics Performance Index (LPI), which uses six core indicators to rank countries with regard to their overall logistics performance. In the past decade, the LPI has been widely used by policymakers and researchers to formulate measures on logistics and freight transportation. At the moment, however, the different indicators are all regarded as being equally important when the overall index score is calculated, which seems highly unlikely within the complex system of logistics. This research assigns weights to the six components using the Best Worst Method (BWM), a multi-criteria decision-analysis method. A questionnaire among 107 experts from different countries found significant differences with the equal weights used in the current LPI. Infrastructure is considered the most important component for logistics performance, with a weight of 0.24, more than twice as important as tracking and tracing, which is considered to be the least important factor, with a weight of 0.10. The findings are relevant for policymakers in transportation and logistics. Although the weights now have only a mild effect on rankings due to the correlation between the LPI indicators, they may point towards different policy priorities compared to the current LPI. Our results also point out some possible weaknesses in the LPI methodology.