Logistics software sales likely to skyrocket

By Staff -- Logistics Management, 2/1/2001

Sales for software and services used in international trade and logistics will top $1 billion by the end of the year 2005, according to a report from ARC Advisory Group. The Dedham, Mass.-based market-analysis organization says that segment netted $165 million in revenues last year and predicts that sales will increase sixfold in the next five years.

The report's author, ARC Senior Analyst Adrian Gonzalez, says he looked at the market for applications that facilitate trade or provide in-transit visibility of inventory across national borders. The study did not include revenues from other, more common types of logistics software such as warehouse management systems or transportation management systems designed for domestic use.

ARC bases its forecast for sixfold revenue growth on its belief that companies will invest in these applications in order to use their logistics operations as a competitive advantage. "Traditionally, the primary goal of logistics, especially transportation, was to reduce costs," says Gonzalez. "[Although] cost reduction is still a goal, logistics is quickly becoming a strategic weapon for companies."

Gonzalez notes that software-enhanced logistics operations can improve service to the point where it differentiates a company from its competitors. "In today's competitive environment, where many products are becoming commodities, companies can no longer compete solely on price or features," he says. "Customers are making purchasing decisions based on service. Therefore, logistics is at the heart of customer satisfaction."

Gonzalez adds that no software vendor currently offers a complete integrated suite of global logistics applications. Users, therefore, still have to patch together their own global logistics solutions by using products from various software providers.