Logistics has always been a vital part of the supply chain, but the rise of the Internet has forced firms to adapt their traditional processes to the Web, according to IDC's Special Report Series on eLogistics in Asia/Pacific. In line with this trend, the corporate world has accepted the benefits of outsourcing across a range of business functions. IT outsourcing is picking up and the external control of a supply chain is already a reality in some sectors worldwide. The next logical step appears to be where a contracted lead provider becomes responsible for the smooth execution of a logistics network. Implicit will be a heavy reliance on technology for both the front and back end.

Incumbents have retained the edge but an assortment of new players is scrambling to take market share. The newcomers' strength lies in IT, integration skills and innovative practices, but convincing clients of their staying power has been difficult. Market sentiment has not helped and new firms face serious hurdles to success.

"No matter how good the technology is, logistics is a traditional industry with established relationships and ecosystems, thus is a tough challenge," says IDC's Caron Harrison, Senior Analyst, Services Research, IDC Asia/Pacific.

IDC believes that the logistics market is in the midst of a wave of consolidation at both the local and regional levels. Consolidation will first impact the various logistics players (i.e. traditionals, pure-plays, etc.), followed eventually by a sorting along local and regional lines as economies are opened.

Weak traditional players, mostly local in nature, will join the over-extended pure-plays on the way to the boneyard. This consolidation will be painful, but will improve the sector as a whole. The best of breed from both the traditional and non-traditional logistics sectors will find value in cooperation and the division between local and foreign will come to the fore. The advantage will lie with the global giants, as most local firms will find it difficult to compete. IDC expects that a few governments will seek to protect their domestic logistics sectors, but it will only be a stopgap measure. Protectionist measures are self-limiting, and while they may encourage global firms to seek out local partners, unless these tie-ups prove of value, global firms will look to operate their own networks. These will be easier for them to manage and integrate into existing IT systems.

IDC's Special Report Series on eLogistics in Asia/Pacific examines the market in five geographies (Korea, Greater China, India, ASEAN and ANZ) as well as Asia/Pacific in overview. With profiles of 60 global, regional and country players, this report series is the most comprehensive assessment of the eLogistics market in this region. For more information, contact Sharon Yeo at syeo@idc.com or at 65-228-7761.