Report: Online Logistics Industry Gaining Ground in Europe

Paving the way for Internet-based logistic networks, online exchanges and private hubs to gain a foothold in the market, traditional shipping and transfer exchanges are beginning to lose their grip on the European business-to-business (B2B) market, according to a report released Tuesday by Forrester Research.

"European executives are right to be bullish about online logistics," said Forrester senior analyst Charles Homs.

"As a result of increased international online trade, the use of the Internet to monitor and move goods will grow 15-fold within the next five years," Homs said.

The Forrester report forecasts that online logistics revenue will spike to US$122.5 billion by 2005, accounting for 21 percent of overall logistics spending.

Getting Around

In particular, Forrester predicts that trucking will dominate the European online logistics industry, racking up over $63.5 billion in revenue and edging out other methods of tracking transport data. In fact, the study said the shipment of goods via roadways will amount to more than half of total online logistics activity.

Meanwhile, transport support services will seize 20 percent of the entire Internet logistics market, rendering these services the second-largest shipment activity, with over $32 billion.

Air freight's benefit from the shift to online logistics deployment will remain small, said Forrester, with only 3 percent of such activity heading online by 2005.

Returns for Senders

As industries on the continent continue to select the most advantageous transportation mode in the real world, Forrester said, they will also now have to choose an Internet tracking venue that best suits their product characteristics and supply chains.

The study said that the construction industry will likely take the lead in moving logistics online. Although the sector spends just 5.2 percent of the cost of sales on logistics, it will manage to pull in roughly $126 billion as a result of the switch by 2005.

The report said that the paper and office products market is also set to perform well in public e-marketplaces, accounting for more than a third of total logistics costs tied to such B2B exchanges with nearly $14 billion.

Logistics for consumer goods, however, do not provide as good a return as other sectors, taking 10 percent of the cost of sales . Forrester concluded that the perishable nature of the products, as well as the complexity of packaging and routing associated with consumer goods, are reasons for the high costs.

Heavy Lifting

The study cautioned that while the shift to online logistics will not be smooth, the overall logistics industry will mature over the next four years to be able to capitalize on available opportunities.

However, Forrester said, firms that are tracking their move of logistics to the Internet must "act immediately" to gain direct benefits.

"As this space evolves over the next two years, firms must analyze online logistics needs by online venues, they must tie online sales into online logistics, and finally, they must defragment the supply chain to benefit from online logistics," said Homs.

To compile data for its report on "Europe's Online Logistics Push," Forrester interviewed 30 logistics executives at large European firms about their use of Internet and e-marketplaces for shipment and monitoring activities.