Decrying the region’s “traditionalist” approach to exports, as well as inadequate legislative and regulatory frameworks, Director of Transport and Disaster Risk Reduction of the Association of Caribbean States (ACS) George Nicholson says improving logistics performance should be a crucial policy objective with improved customs clearance, enhanced transport infrastructure through ports, internal connections and the availability of advanced logistics services constituting some of the key objectives for the region. This goal, he says, “should look well beyond infrastructure and the ports and focus on the development of regulatory aspects of trade and the development of local logistics competencies through partnerships with overseas investors.”

In a recently published opinion piece for Caribbean Journal focusing on transport, logistics and competitiveness in the Caribbean, Nicholson laments the fact that the use of third-party logistics, or 3PL, is not a well-advanced concept in the region.

“In most industrial countries, almost a third of logistics turnover is contracted to 3PL providers. Traditionally, companies outsource non-core functions to logistics providers in order to gain operational efficiencies and reduce costs. With the significant increase around the world of offshore manufacturing operations during the 1990s, there has been a shift from domestic supply chains to global supply chains with international logistics needs.

“This has increased with the emergence of China as a low-cost manufacturing center, and the proliferation of free trade areas. Doing business globally has become more complex and requires increased expertise, at the regional and local levels, in managing transportation and warehousing, and adhering to various governmental regulations,” Nicholson writes.

He says it is this increase in supply chain complexity that has driven many companies to engage the help of 3PLs as logistics and regulatory specialists, and that 3PLs with expertise in international transportation management, warehousing and distribution are providing economies with access to the operational “backbone” of global trade.

“While there has been some limited development in 3PL services regionally, progression toward the earlier stage of second-party logistics — in which companies unify their internal transport and warehousing functions and create their own internal logistics departments — is still underway,” he says.

Nicholson writes that despite its importance, the region has not yet placed logistics at the center of national and corporate competitiveness policies, and argues that improving logistics performance should be a crucial policy objective with improved customs clearance, enhanced transport infrastructure through ports, internal connections, and the availability of advanced logistics services constituting some of the key objectives for the region.

“The goal should look well beyond infrastructure and the ports, and focus on the development of regulatory aspects of trade and the development of local logistics competencies through partnerships with overseas investors.

“The approach to production, trade and transportation has evolved, and the challenge now facing the Caribbean is how to connect to global supply chains and maximize the opportunities from global trans-shipment hubs,” he says.

Nicholson raises the 3PL question in the context of a call for regional policy change that is broad, seeking to stimulate innovation in transport services, develop new products, advance regulation using electronic services and encourage investment in new areas.

He points out that regional trade policy, whether internally or externally guided, has traditionally focused on removing tariff and non-tariff barriers.

“This has long been espoused as the catalyst that would enhance regional trade and its effect on the economy. Trade facilitation however and in particular that which is related to transport costs has largely been ignored in the regional trade agenda.

“The last few years have seen significant and dynamic development in international trade, and with the opening up of economies to the expansion of supply chains, the thrust toward globalization has shown itself to be transport-intensive. Nowhere has this been more evident than in the development and changes in global freight movement systems. Internationally, this change drives modifications to and changes in public policies; however, the policymaking frameworks in the region are typically lethargic, moving at a glacial pace and sometimes countercyclical to international actions.

“The freight logistics sector poses many challenges and presents a complex agenda that requires action and coordination across several government and private sectors,” he says.

Nicholson questions how well-poised the region is to capitalize on the changes in the market, and further, whether the sector is ready to evolve in the face of new norms in the shipping and logistics industry.

“Transportation is recognized to be an inherently crucial component in supporting economic activities as well as providing opportunities for economic development. The provision of transport infrastructure has long been a common priority for governments, as the region has long been considered to be lacking in this area. In recent years, the greater Caribbean has seen remarkable growth in the containerized traffic handled, driven in part by the development and expansion of port infrastructure.”

“Within this new environment, and in anticipation of additional traffic growth resulting from the expansion of the Panama Canal, development of logistics services must now be seen as a critical endeavor,” Nicholson says.