Study pegs global logistics market at $3.43 trillion

The average total logistics expenditure of the 12 original European Union members is the highest of any logistics market in the world, according to a Michigan State study that analyzed figures from an International Monetary Fund database.

By Staff -- Logistics Management, 8/1/1998

It's hard enough to define the term "logistics" to everyone's satisfaction; trying to determine the size of the logistics market has been an even more difficult task--one that few have cared to tackle. One exception is Robert V. Delaney of Cass Logistics, whose annual "State of Logistics" report generally is accepted as the best estimate of the U.S. logistics market. But until now, there has been no formal study of the size of the world's logistics market--an increasingly important subject as both manufacturers and their service providers become global enterprises.

That gap has been filled by a study conducted last year by Dr. Donald J. Bowersox and Dr. Roger Calantone of Michigan State University. Their research makes the leap from local to global data, analyzing logistics expenditures by country and by region. The cost estimates they used were developed by the Global Logistics Market Sizing, Compositions and Trends Collaboratory at Michigan State's Eli Broad Graduate School of Management, using data from the International Monetary Fund. The researchers employed statistical, econometric, and artificial-intelligence techniques to estimate logistics expenditures. Funding for the research was provided by GeoLogistics Corp. of Golden, Colo., a non-asset-based logistics service provider that focuses on serving multinational clients.

According to Bowersox and Calantone, a conservative estimate of worldwide logistics costs for 1996 is $3.4 trillion--a "truly awesome" figure, they say. The three countries in North America, which represent 29 percent of the world's Gross Domestic Product (GDP), spent approximately $915 billion on logistics requirements. The 12 original European Union members spent even more in 1996--$941 billion. These countries represent 27 percent of world GDP. Because Asia's most developed economies (Hong Kong, Japan, Korea, Taiwan, and Singapore) have had to integrate resources across a vast geographical region, Asia's logistics expenditures jumped from $517 billion in 1992 to $652 billion in 1996. Finally, the continuing shift of manufacturing to low-cost producers is probably responsible for the aggregate of all remaining countries' enormous leap from $663 billion in 1992 to $916 billion in 1996. (See accompanying graph.)

The study also compared total logistics expenditures to national and regional GDPs. Logistics operations in the United States, with the lowest ratio of logistics expenditures to GDP (10.5 percent), are judged to be most efficient. Close behind is the United Kingdom, with 10.63 percent, followed by France at 11.14 percent. On a regional basis, North America averages 10.77 percent and the 12 original European Union countries average 11.79 percent. Asia weighs in at 11.64 percent, while the aggregate for all remaining countries, including developing nations, is 12.94 percent.

For North America and Europe, these figures are lower than they were in 1992. The ratio of logistics costs to GDP in Asia and other, less-developed nations essentially remained the same. According to Luis Solis, GeoLogistics' executive vice president, strategic marketing and development, the study's finding of a 3.6-percent reduction in the logistics-to-GDP ratio between 1992 and 1996 indicates that logistics operations are becoming more efficient worldwide.