Friday, March 26, 2004

Globalization drives logistics outsourcing

With globalization, companies set up operations in as many countries as possible thus creating logistics requirements to integrate their local subsidiaries.

This requirement has spawned a niche market in the outsourced services industry, creating business for specialized logistics and supply chain companies whose work is to untangle logistical nightmares and simplify things for large conglomerates.

Traditional service providers like UPS and FedEx have long dominated this market. But over time, the requirement has become complex and service providers have learned to specialize in services like package delivery, freight transport, moving, IT services, accounting, and consulting.

Interestingly, according to a report, those poised to make a killing in this business are also conglomerates that have set up subsidiaries that offer logistics services.

The likes of IBM, GE and EDS which have either created or acquired smaller companies that already offer these services.

Currently, these subsidiaries contribute only a fraction of their parent company's bottomline. But with globalization strengthening, logistics could be a significant source of revenues in the future.