Economic prospects

Different studies have indicated that the potential for cost reduction and administrative efficiency are very large in the logistics sector are huge when new technologies and applications are implemented.


As far as transport operators are concerned, Massachusetts Institute of Technology (MIT) concludes that by effectively using the Internet and other new technologies, carriers could reduce overheads by 50% with a 15 to 25 % reduction in transportation costs.


MIT calculated that about half the total cost - such as finance, personnel and fuel – of a carrier is related to the transport unit (truck, ship, and barge); the rest is administrative, sales and marketing. “e-Commerce could save up to 40 percent of overall costs.”


Much time and money is wasted into documentation, which they estimated as 45 percent of the door-to-door delivery cost of products. This “unacceptable” waste could be largely eradicated by effective use of e-Commerce and e-fulfilment, given that it allows for much tighter real-time movement and operational control.


The latter findings are supported by a study of Penn State University (PSU) which indicate that administrative cost reductions with 80% are possible and that transport cost could be reduced by 10%.


However, at present, the e-fulfilment market is very fragmented in the EU and impedes an efficient use of applications.This fragmentation is due on the one hand to a fragmentation of the offer, but, more importantly, on the other hand to a regional variation in using e-aplications and the fact that the integration of the latter are, in many cases, sub-optimal with existing applications.


The available e-fulfilment applications can be separated in two different categories:

§          Fulfilment planning software (design fulfilment network, develop collaborative forecasts, create production plans, inventory needs, procurement schedules, prepare strategic plans).

§          Fulfilment execution software (OMS, WMS, TMS, CRM packages – handles day to day activities, co-ordinates order information with front end operations).


The most cirtical software sectors from e-fulfilment standpoint are:

§          Supply chain management

§          Procurement

§          E-Marketplaces


Other software sectors include content management, e0commerce, electronic marketing, online customer support).


For EU companies many opportunities exist in the market. In 1999 corporations, worldwide, spent $6.2 billion to produce tools that digitally automate, facilitate and complete business transactions online (source: Forrester Research).

The ASP market is estimated to grow to $7.8 billion in 2004, compared to $296 million in 1999 (source: International Data Corporation). By 2003, arount 60% of SCM functionality will be provided from outside the enterprise (80% probability) (source: Gartner group – PWC presentation, CLM2001). European online trade will reach Euro 2,1 billion in 2005 which amounts 33% of the total B2B trade (source: BCI report: Efffecten van ICT op logistieke ketens in Brabant).


The potential impact of e-fulfilment on transportation is also not negligible. It is estimated that e-Fulfilment will have the following beneficial impact on transport use:


Qualitative impact:


1.       E-Fulfilment applications contribute to a better loadfactor, and

2.       A reduction of the number of hauls;

3.       Applications will also have an impact on the haul lengths, which will become shorter, and,

4.       A shift from trucks to vans.


Value proposition for logistics cost swavings for eTMS solution



Cost Savings Potential - % of Freight

RFQ-Web based RFQ process


Shipment Execution-automate manual processes via the Web


Shipment Visibility - Reduce expedites/safety stocks


Rating – Seclect the best carrier for each shipment


Consolidation – Minimize costs through consolidation


Total Potential


(Source: Using the Internet to Reinvent Transportation Management, Shiplogix, CLM2001).


Benefits of e-markets for Logistics Service Providers:

§          Volume leverage through access to new clients / shippers joining an e-market.

§          Asset and capacity utilisation optimisation.

§          Adopt standardised technology and reduce in-house tailored solution sets.

(Source: PWC, E-commerce and the Supply Chain – Making fulfillment work, CLM 2001).


Development of freight exchanges:

§          Increased outsourcing of selected supply chain activities will drive the development of freight exchanges.

(Source: PWC, , E-commerce and the Supply Chain – Making fulfillment work, CLM 2001).


On Line Transportation Bids:

§          Enables efficient and effective bid optimization through services, tools, processes and systems for all modes and regions (large bid/RFQs for both regional and global lanes, spot buys).

§          Decrease total transportation cost while maintaining or increasing the total value.

(Source: Applying New Technologies in Transportation, CLM2001).


The e-Thematic consortium will make recommendations on future RTD to tackle missing links and to encourage scientific and technological development with a view to overcoming the existing fragmentation and compartmentalisation of the e-Fulfilment..


As the project is conceived in a dynamic way, this benefit would be continuous for the whole project period and will no doubt be extended after the official lifetime of the project through the database. National and European financed RTD projects will get the chance to increase their visibility through e-Thematic.


As far as the users (shippers) are concerned, Forrester Research claims that the majority of logistics professionals are unfamiliar with technologies and applications in logistics and supply chain management in an era of globalization and e-Business. Among Forrester’s findings:


§          76 percent of the professionals can’t track their product en route or get updates via phone, fax, or email;

§          only 19 percent track product movement more often than weekly.


These findings are explained by the fact that many companies have invested heavily in EDI. These investments are now sunken and companies are hesitant to make new investments in e-business services. If they decide to invest in e-commerce they, in many cases, limit these investments to the front office.


As e-Business continues to develop, new transportation and logistics technologies will continue to emerge. The challenge is to offer actors an integrated menu of transportation, logistics, and supply chain applications.


Long-term success will require collaboration between partners in the industry, both in the ICT- sector as in the logistics sector. Collaborative commerce is what the shippers’ community now wants and technology and application developers are emerging to answer these needs.


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