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This study focuses on the adoption and implications of information and communication technology (ICT) and e-business activity in the transport and logistics services industry (TLS). The study shows how companies in this sector use ICT for managing their business processes, internally and in exchange 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 on firms and on the industry as a whole. Possible implications for policy actions are indicated.
Findings presented in this report are based on literature, expert interviews, 12 company case studies, an international survey among 1,097 enterprises form the sector on their ICT usage conducted by the SeBW in September 2007. (see Section 1.3 and AnnexI for more information about data sources). For data analysis, descriptive and analytical statistical methods were used, including advanced statistical methods such as growth accounting.
The transport and logistics industry, as defined for the purpose of this study (see Section 2.1), 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).
Transport and logistics are key components of a successful economy: they play a major role in national economies and are significant contributors at both the national and local level. Transport and logistics underpin 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’s gross domestic product (GDP) and accounts for around 5 % of employment in the EU (see Section 2.2).
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 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 (see Section 2.3).NACE Revision 2 is a four-digit classification of business activities. It is a revision of the “General Industrial Classification of Economic Activities within the European Communities”, known by the acronym NACE and originally published by Eurostat in 1970. NACE Rev. 2 replaced Rev. 1.1 on 1 January 2008.
ICT can have a significant influence on the mobility of people and goods. ICT is also a potentially important enabler of change 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 reservations, vehicle guidance, and mobility cards. Over the last few years firms operating in the transport and logistics sector have made significant progress in their adoption of new technologies, particularly those linked to the internet and e-business (see Chapter 3).
Basic ICT infrastructure
Nearly all companies which use computers in the TLS sector said in 2007 that they were connected to the internet (97%). There is a clear trend towards broadband connections: except for micro-firms, more than 40% of all companies are connected by broadband, i.e. with a bandwidth of more than 2 Mbit/s (see Section 3.1 and following Exhibit). Broadband is seen as an important precondition for the wider diffusion of e-business applications in general.
Bandwidth of companies' internet access
(in % of companies*, TLS industry, 2007)
* figure for TLS total (EU-7) weighted by employment
13% of all companies from the sector (accounting for 21% of employment) said that they used Voice-over-IP services. It can be expected, in general, that usage will increase rapidly over the next few years.
The demand for e-skills and ICT practitioners
Only 8% of all enterprises actually employ ICT practitioners (most of the small companies cannot do so). The percentage is higher among medium (33%) and large companies (66%). 45% of companies said in the survey that they had outsourced ICT services to external service providers in the past 12 months prior to the interview (see Section 3.2). Nevertheless, survey results also indicate a certain lack of awareness regarding the importance of ICT skills and resources which are needed to exploit technological innovation and to support the reorganisation of work processes. It appears that the availability of qualified personnel with specialised skills is quite limited in the transport and logistics sector. This could be a critical issue for the sector in the future, as it might be a barriers for innovation.
The continuous improvement of the basic ICT infrastructure in the TLS 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 advanced e-business software systems.
ERP (Enterprise Resource Planning) systems are one of the main platforms 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 with each other. However, there is still a considerable gap in the diffusion of ERP systems between micro and small firms on the one hand and the medium-sized and large firms on the other (see following Exhibit). The relatively high implementation costs for ERP systems remain a critical challenge for SMEs (see Section 3.4).
% of companies* using an ERP system
* figure for TLS total (EU-7) weighted by employment
Use of specific software systems for transport & logistics management
Specific software solutions for the TLS sector, such as Cargo Handling Technology, Fleet Control System and ITMS (Intermodal Transportation Management Systems) are also mostly used by large transport and logistics companies. For example, only about 20% of the small firms reported that they used Fleet Control Systems, but diffusion increases to about 35% of medium-sized and 43% of large firms. The pattern is similar for Cargo Handling Technology and ITMS (see Section 3.4).
% of companies* using specific transport & logistics software systems
* figures for TLS total (EU-7) weighted by employment
Deployment of e-standards
With regard to the deployment of standards for e-business, the survey found that about a third of the medium-sized and more than 40% of the large firms in the sector use Electronic Data Interchange (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. It looks like EDI based standards will continue to play an important role for e-business messaging in TLS industries in the near future (see Section 3.3).
Overall assessment
Asked for a general assessment of the status of e-business in their company, more than a quarter of the companies (by their share of employment) felt that at least "a good deal" of their exchanges with business partners were conducted electronically (in 2007); three quarters said that at least some of their processes are conducted as e business (see Exhibit). A quarter of all companies said they did not use any kind of e-business.
% Companies* saying that … of your business processes are conducted as e-business (2007)
* weighted by employment (read: "companies
representing x% of employment")
"e-Commerce" can mean different things in the TLS sector (see Section 3.6). In passenger transport, it can mean "e-ticketing", enabling customers to order and receive their ticket online. In freight transport and logistics, e-commerce includes initiating, tracking, and acknowledging shipments online. The special role of this subsector in this context is that its business is exactly to provide these services to other industries. Thus, logistics companies are not only users of e-business themselves, but, in a way, provider of e-services. In all cases, e-commerce is in this sector closely linked with the objective to optimise business processes: paperless trade eliminates the operational costs related to manual paper processing and increases the transparency of the supply chain and information exchange between trading partners.
Another e-commerce application is e-ticketing in passenger transport. This is a ticket-less concept, which ideally provides companies with the opportunity to reduce administrative costs and, at the same time, offer a higher level of service to travellers (see Section 3.6.2).
All in all, 35% of TLS firms (by their share of employment) said they accepted orders from customers online. There is practically no difference between companies from the various size-bands in this respect. Even among small firms, 30-35% said that they allowed customers to order services 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. CRM (customer relationship management) systems, a comprehensive software to capture, storage and analysis customer data in an integrated way, is not yet widely used in the TLS sector (see Section 3.6.3).
% Companies* accepting orders online /
using a CRM system
* figures for TLS total (EU-7) weighted by employment
According to the survey, US companies from the TLS industries are slightly better equipped with ICT infrastructure and systems than their European counterparts. For example, the diffusion of Intermodal Transportation Management Systems (ITMS) or RFID technology is more widely used in the US. On the other hand, in some other areas, European companies appear to be more active using specific software systems, like Warehouse Management Maintenance Management Systems (MMS).
The self-assessment of firms to what extent their data exchanges with business partners are conducted electronically, however, suggests that enterprises in Europe and in the US have reached a similar status.
e-Business adoption in EU vs. US firms (in %, by their share of firms) - 2007
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 Systems) |
11 |
15 |
SMC (Supply Chain Management) |
4 |
6 |
* EU-7 include UK, SE, PL, IT, FR, ES, DE
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.
Chapter 4 presents an economic analysis of the impacts of ICT adoption, focusing on implications for productivity growth, innovation dynamics and market competition. The analysis used data from the EU KLEMS Productivity and Growth Accounts (macro-data) as well as from the e-Business Survey 2007 (micro-data).
Regarding the relationships between ICT capital investment and productivity growth (see Section 4.1), the results indicate that an instantaneous impact of ICT capital investment on total factor productivity growth does not take place in this sector. This is not in line with the typically reported results in the standard growth accounting literature, where total factor productivity (TFP) tends to instantaneously rise with increased investment in ICT capital.
Regressions based on the micro-data from the e-Business Survey 2007 aimed to explore links between ICT usage, companies' innovation activities and their performance (measured as increases in market share and turnover). Results indicate that the following factors are positively correlated with ICT adoption and could thus be drivers of ICT adoption (see Sections 4.1 and 4.2):
Statistical regressions also found evidence that ICT adoption is linked with innovation, outsourcing activities and organisational change (see Sections 4.2 and 4.3):
ICT usage has a positive impact on company performance. Firms in the TLS sector that introduced ICT-enabled innovations were more likely to have experienced sales growth and an increase in market share.
The empirical study findings (micro-data and case study analysis, macro-economic analysis) lead to the conclusion that the following issues are particularly relevant for policy considerations (see Section 6.3):
Promoting ICT solutions for SMEs, in particular the development of affordable ERP systems for SMEs. As in other sectors, small businesses are slower than large ones to adopt new ICT. For instance, there is still a considerable gap in ERP adoption. Furthermore, considering that e-collaboration increases innovative output, initiatives to encourage cooperation among SMEs and the formation of networks and clusters are recommended.
Improving ICT skills and managerial understanding for e-business. ICT usage and high levels of employee’s skills complement each other, leading to skill-biased technological change and an advantage for TLS firms with highly skilled employees in adopting and using ICT. The picture that emerges from the survey is that ICT skills are a decisive issue, especially among SMEs, notably at the managerial level, i.e. how to use e-business to support a company’s strategy. Training programmes need to be more focused on managerial understanding and skills for e-business, such as how to effectively integrate e-business processes into existing business models and strategies to change organisational structures.
Developing standards for e-business, facilitating the process of interoperability. Despite the wide diffusion of ICT applications in the sector, there is still potential for further productivity increases through supply chain integration. This potential currently remains underutilised due to interoperability problems. Public bodies might help firms to overcome the market failure resulting form the co-ordination problem.
Promoting efforts towards innovation. ICT adoption and complementary investments in skills enhance innovation, which is positively associated with turnover growth. As a result, innovative firms are more likely to grow. The empirical evidence presented in this study corresponds with theoretical predictions that suggest that ICT and innovation are positively associated with turnover and productivity growth at the firm level.
