Interim study report - Executive Summary (January 2008)
(The final study report will be available by the end of September 2008.)
This is an interim report of the Sectoral e-Business Watch study on transport services (TS). The study informs about the state-of-play how companies use ICT for managing their business processes, internally and in exchanges with suppliers and customers. It identifies related opportunities and drivers as well as possible barriers for ICT adoption and digital integration and assesses the impact of ICT deployment for firms and for the industry as a whole. Possible implications for policy actions are indicated.
Findings presented in this interim report are based on literature, expert interviews and case studies. The final report will –in addition– consider the results of an international survey among 1.097 enterprises on their ICT usage conducted by the SeBW in August/September 2007. Results of an econometric analysis on ICT impacts will be added in the final study report (Chapter 4).
The transport and logistics industry, as defined for the study purpose, covers the following business activities: rail transport (both passengers and freight) and land/road transport (passengers and freight) (NACE Rev. 2, 49.1; 49.2; 49.3 and 49.4). Furthermore, the logistics sectors of warehousing and storage, cargo handling and other transportation support activities (NACE Rev. 2, 52.10, 52.24, and 52.29) are considered, to the extent that these sectors interact with the main business activities covered by the study (49.1-4).
Transport and logistics are key components of a successful economy: they play a major role in nationals’ economy and are significant contributors at both the national and local level. It underpins the economy, enabling the movement of goods, services and people as efficiently as possible. The transport sector in Europe plays a significant role in its economic development. It currently generates 7% of European Union gross domestic product (GDP) and for around 5 % of employment in the EU.
The fast growth of freight transport –driven to a large extent by economic decisions– contributes to growth and employment but also causes congestion, accidents, noise, pollution, increased reliance on imported fossil fuels, and energy loss. The challenge for the European policy for the transport services is to find solutions for freight and passengers that are economically viable and that also promote sustainable growth, fuel economy, the reduction of emissions, safe and healthy lifestyles and social inclusion.
Information and communication technologies (ICT) are major potential influences on the mobility of people and goods. ICT are also potentially important enablers of changes in social and organisational practices, thus affecting the demand for transport in spatial and temporal terms. Technological trends will meet the demand for comfort, safety and speed through advances in ICT in the field of telematics. This covers systems for traffic and transport management, travel information and reservation, vehicle guidance, and mobility cards. Over the last few years firms operating in the T&L sector have made significant progress in their adoption of new technologies, particularly those linked to the internet and e-business.
Nearly all companies (97%) which use computers in the T&L sector said that they are connected to Internet. On the path to the adoption of e-business, connectivity is the first step and also a precondition for all potential benefits of the use of computer networks. The tendency of the firms in the sector is to have a higher broadband connection. Only 17% of the sector companies (representing 8% of the sector workforce) still use an Internet access up to 144 kbit/s, while a half of the sector firms have bandwidth connection ranging from 144 kbit/s to 2 Mbit/s and near a third have more than 2 Mbit/s bandwidth connections.
In the T&L industry, a half of all firms (75% for the Logistic subsector) representing 75% of employees, operate a LAN. However, the deployment of the Wireless LAN technology only reach 22% of the sector companies, although it is already used by about a half of the large-sized firms, and even one third of the small companies.
Almost a quarter of firms (comprising about half of the sector's employment) enable remote access to their computer network. This infrastructure indicator is quite common among large firms (74%) and medium-sized ones (57%); however, is not yet widely used by small firms (23%). This fact, along with other ICT adoption indicators, strongly indicates the different stage of ICT architecture maturity levels of companies from different size-bands.
13% of all companies from the sector (accounting for 21% of employment) said that they used Voice-over-IP services. Yet, the results vary between different company size classes. With a diffusion rate of 13%, micro enterprises are behind the level of usage of large companies, where 26% reported using Voice-over-IP services. It can be expected, in general, that usage will increase rapidly over the next few years; a common scenario predicts that all fixed network voice telephony might be converted to internet protocol.
Regarding ICT and e-business skills, only 8% of enterprises actually employ ICT practitioners, usually medium- (33%) and large-sized (66%) firms, while 45% have outsourced any ICT services to external service providers in the last 12 months. Small companies usually do not employ practitioners: less than 10% of micro- and small-sized firms employ practitioners. This small share of micro and small enterprises saying that they employ ICT practitioners can be explained by the fact that it seems to be more economic for smaller companies to outsource ICT services (e.g. desktop management or web hosting) than to employ their own ICT practitioners.
The continuous improvement of the basic ICT infrastructure in the T&L sector has allowed companies to embrace opportunities to substitute paper-based and manual processes by electronic exchanges, thus optimising the flow of information and documents in and between companies, taking advantages of the increased diffusion of e-business software systems. ERP (Enterprise Resource Planning) systems are currently the main platform to enable this goal. If a customer or supplier has an ERP system, data related to orders (received or placed) is typically exchanged in a paper-less way between the ERP systems of the two companies trading which each other.
13% of the firms (23% by their share of employment) say that their exchanges with business partners are mostly conducted electronically; another 10% (with 15% of the employment) say that they process data with business partners mostly electronically, but exchanged in paper based format.
However, there is still a considerable gap in ERP adoption between micro and small firms on the one hand and the medium-sized and large firms on the other: about 41% of large companies and 23% of medium-sized ones said they had an ERP system, but less than 8% of micro and small firms did. The relatively high implementation costs for ERP systems remain a critical challenge for SMEs.
Exhibit: % Companies* using an ERP system (figures for TL total (EU-7) weighted by employment)
With regard to the deployment of specific software solutions for the T&L sector (for example Cargo Handling Technology, Fleet Control System and Intermodal Transportation Management Systems), survey results show that companies within the T&L industry use these technologies quite differently.
Exhibit: % Companies* using specific transport & logistics software systems (figures for TL total (EU-7) weighted by employment)
Again, the picture for small companies differs from the one for medium- and large-sized firms: about 22% of the small firms reported that they use Fleet Control Systems, while in medium-sized firms the share was about 35%, in large firms even 43%. The pattern is the same for the Cargo Handling Technology and for the Intermodal Transportation Management System.
With regard to the deployment of standards, figures related to the T&L sector shows that about a third of medium-sized companies and more than 40% of large firms report that they use EDI. Only 7% of micro companies and 12% of small companies use EDI-based standards. Thus, the size of a company has an enormous influence on the adoption of standards: the smaller the company, the more unlikely it is that it adopts any of these standards; the larger the company, the more likely it is that it uses one of these standards. It looks like EDI based standards will continue to play an important role for e-business messaging in T&L industries in the near future.
35% of T&L firms (by their share of employment) said they accepted orders online. There is practically no difference between companies from the various size-bands in this respect. 17% reported using a Customer Relationship Management (CRM) system.
Exhibit: % Companies accepting orders online / using a CRM system (figures for TL total (EU-7) weighted by employment)
Even among small firms, 30-35% that said that they enabled customers to order products online. This appears to be quite a high figure at first sight. However, a majority of close to 95% of those companies also said that online orders accounted for up to 25% of their total orders received. Only about 5% receive more than a quarter of their orders online.
The inclusion, for the first time, of US companies in e-Business Watch sectoral studies allow us to analyse the difference between Europe and the US firms in the pattern of ICT adoption. In terms of ICT infrastructure, US companies appear to be better equipped on average than their European counterparts, as well as in a few specific areas like the Intermodal Transportation Management System or in the use of radio frequency identification device (RFID).
On the other hand, in some other areas, European companies appear to be more active using specific software systems, like Warehouse Management Systems or Maintenance Management Systems.
Exhibit: e-Business adoption in EU vs. US firms (in %, by their share of firms) - 2007 ( EU-7 include UK, SE, PL, IT, FR, ES, DE)
ICT adoption indicator |
USA |
EU-7* |
Internet Access |
100 |
97 |
Wireless LAN |
43 |
22 |
Intranet |
29 |
24 |
(ITMS) Intermodal Transportation Management System |
8 |
4 |
RFID (Radio Frequency Identification Device) |
7 |
2 |
Data Exchange mostly electronically |
13 |
13 |
WMS (Warehouse Management System) |
6 |
15 |
ITS (Intelligent Transport System) |
1 |
7 |
MMS (Maintenance Management System) |
11 |
15 |
SMC (Supply Chain Management) |
4 |
6 |
If the percentage of firms that say that their data exchanges with business partners are “mostly processed and exchanged electronically”, is a good indicator of the degree of digitalisation of a sector, then we can conclude that that degree is the same in Europe and in the US. They show the same value: 13% of firms.
