Need for operational efficiency drives IT investment

PALO ALTO, Calif.- According to a recent report from Frost & Sullivan, rising fuel prices and security related expenses are increasing the overall operating costs in the transportation and warehousing service markets.

Simultaneously, expansion of the product and service portfolio in the transportation sector is compelling participants to increase investment in Web-based solutions to streamline expenses and stay ahead of the competition.

IT and telecom spending trends within the U.S. Transportation and Warehousing Services Markets reveals that IT/Telecom spending in this market totaled $30.3 billion in 2004 and projects to reach $38 billion in 2010, says Frost & Sullivan.

While certain transportation companies have been successful in transferring the brunt of the rising prices to the end users, some are unable to do so due to price sensitivity and overcapacity, says the study. As a result, companies are paring down costs on specific areas such as customer care.

“With the growth in logistics due to expansion in e-commerce activity, the need for effective and efficient fleet management has become a leading business priority for commercial freight service providers,” explains Frost & Sullivan Industry Analyst Imran Khan.

Others, such as United Parcel Service of America, Inc. (UPS) and FedEx continue to invest in package tracking systems in an attempt to enhance customer experience as well as realize operational improvements. This is especially so for logistics service providers (LSPs) that requires enhanced fleet management capabilities.

Most companies are also investing in vehicle tracking systems to create orderly schedules for lead pick-ups and deliveries and fulfill growing consumer demands. The growing demands from customers are also placing pressure on LSPs to handle the entire supply chain responsibility.

“For example, the growing migration of manufacturers and retailers to radio frequency identification (RFID)-based inventory tracking and management systems is forcing LSPs to incorporate this technology into their logistics solutions,” adds Khan.