3PLs are riding high in Europe

Business for third-party logistics providers (3PLs) looks very promising in Europe, according to market analyst Datamonitor. Current research reveals that 3PL spending in the automotive, consumer goods, high-tech, pharmaceutical and retail industries will increase significantly over the next four years.

In Europe's highly competitive automotive industry, for example, continual pressure on costs will mean 3PLs will account for 60% of overall expenditure on logistics services by 2010. However, 3PLs must understand the factors driving the outsourcing trend in respective industries if they hope to win new business.

Although the grocery retail sector is largely nationalistic due to differing domestic tastes within Europe, the largest European markets are reaching saturation point. As a result, grocery retail companies are developing along two dimensions.

First, there has been a marked increase in the product ranges offered by the largest retailers such as Asda and Tesco, which now include clothing and also electrical items. Second, companies are also expanding geographically, particularly into Eastern Europe and the Far East.

According to Datamonitor, both of these will impact on the complexity of the industry's supply chain, creating windows of opportunity for 3PLs to capture a share of what Datamonitor expects to be a $12.1 billion (EUR10 billion) rise in logistics spend to be realized by 2010.

Meanwhile, within consumer electronics, the introduction of the Waste Electrical and Electronic (WEEE) directive in June will offer 3PLs with reverse logistics capabilities a chance to capture significant market share.

"Within the consumer grocery sector, European companies are shifting their gaze eastwards due to competitive pressures caused by an increase in private labeling and a rise in discounters," says Chris Morgan, Datamonitor’s logistics analyst and author of the research. "However, as with the retail sector, success in Eastern Europe will largely depend on the available logistics network, which is where 3PLs with the necessary infrastructure could play a significant role."

The supply chain in the high-tech sector has come under pressure due to the success of the just-in-time business model, and the continuing globalization of both the production and consumer bases. As a result, logistics operations are becomingly increasingly complex. Consequently, Datamonitor expects logistics spend in this sector to increase by $726 million (EUR600 million) through to 2010, two-thirds of which will be given to 3PLs.

Outsourcing of logistics in the European pharmaceutical industry is not as mature as in the U.S. Although traditionally a difficult sector to break into due to strict compliance codes, 3PLs have the potential to capture market share due to their expertise. This will be especially true for those that can offer global networks, as companies are relocating their manufacturing bases to low cost countries due to the deregulation of the pharmaceutical market and the strengthening of intellectual property agreements.

The problem of higher wages in the EU countries has continued to force automotive manufacturers to shift some production to the emerging markets, including the recently ascended EU states. Moreover, in 2007 the introduction of the End of Life Directive, which necessitates that manufacturers set up systems for dealing with old automotive parts, will also present considerable opportunities to logistics players.

According to Morgan, "The driver for all industries looking to outsource the movement of their goods is the need to reduce costs in order to increase profitability. Employing an expert to maintain various stages of its logistical supply chain allows a company to focus on its core competencies and 'stick to the knitting'. However, 3PLs will have to understand and anticipate the specific factors driving their targeted industry if they are to satisfy current customers, capture new ones and make the most of this boom time."

www.datamonitor.com

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish