The complex market for logistics business process outsourcing (BPO) is undergoing a transformation that will see it grow from a total value of $155.8bn in 2002 to $276.5bn in 2007, industry analysts said today.
According to market watcher IDC, the sector will enjoy a five-year compound annual growth rate of 12 per cent.
The analyst said that the major shifts in the drivers underlying client demand for BPO services include globalisation, technological advancement, speed-to-market issues and overall economic pressures.
"If asked to describe in one word the dynamics underlying the logistics BPO industry, that word would be 'complexity'," said Romala Ravi, manager for supply chain and logistics services research at IDC.
"Business complexity is driving the outsourcing of logistics functions, yet the demand for more comprehensive, integrated services is in turn driving the complexity of delivering these services.
"In this environment, it will be critical for logistics vendors to home in on their strengths and focus on what they do best, rather than trying to be everything to everyone."
The IDC study, Worldwide and US Logistics BPO Services Forecast and Analysis 2003-2007, found that logistics BPO vendors have made significant progress, evolving in line with - and even sometimes ahead of - client demand, and positioning themselves to address these shifting demand drivers.
The analyst indicated that today's logistics BPO market has expanded in scope to touch various components of the supply chain, such as supplier management and procurement, as well as components of the demand chain, such as customer care and after-market support.
Faced with this mixture of opportunities and challenges, IDC believes that success in this market will be maximised if service providers help their clients work through the critical change management issues associated with integrating disparate components of their logistics and supply chain systems.
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