1 THE DEVELOPMENT OF INTERNATIONAL FREIGHT TRANSPORT AS A RESULT OF DEVELOPMENTS IN INTERNATIONAL TRADE, LOGISTICS AND EUROPEAN INTEGRATION C.J. Ruijgrok, TNO Mobility and Logistics & TIAS Business School
2 Summary The development of international trade is one of the main driving forces behind the international and transcontinental freight transport. Within Europe the European integration has given a significant impulse for the development of trans border freight transport. A third element, which is of significant influence on both the volume and the composition of international freight transport concerns the (inter company) logistics organization. Where which activity takes place, is being determined by the logistics requirements of the actors in the supply chain, most importantly its final customers. In this paper a number of trends are identified and the results of a number of studies that indicate the consequences of these trends are summarized, focusing on the consequences of freight transport from, to and through the European territory. Samenvatting De ontwikkeling van de wereldhandel is één van de belangrijkste drijvende krachten achter de ontwikkeling van het transcontinentale goederenvervoer. Binnen Europa heeft de Europese integratie een belangrijke impuls gegeven aan de ontwikkeling van het grensoverschrijdende goederenvervoer. Een derde element dat van grote invloed is op de omvang en structuur van het internationale goederenvervoer betreft de logistieke organisatie. Waar welke activiteit plaatsvindt en met welke vervoerwijze dit gebeurt, wordt bepaald door de logistiek eisen aan de supply chain, en met name door de eindklanten daarvan. In deze paper worden een aantal van deze trends op een rij gezet en worden de resultaten van een aantal studies die ingaan op de consequenties van deze trends voor de ontwikkeling van het goederenvervoer van, naar en door Nederland en Europa aangegeven.
3 Introduction and description of some general trends This paper describes the development of freight flows to and from Europe, as a result of some major changes in the world economy and the world trade. It results from a study carried out on behalf of Holland International Distribution Council, together with Ernst & Young and Groenewout. It presents public available data and data obtained in studies carried out by TNO (NDL, 2006). Outsourced manufacturing, particularly to Asia, has significantly changed transportation patterns, and this trend is expected to continue as more companies seek to reduce production costs by moving operations and/or sourcing offshore. The transition to longer supply chains is expected to have a major impact on transportation markets of the future. While logistics costs have dropped dramatically in the last decades, flows have grown twice as hard internationally as within national borders. Together with the growing capability of firms to individualize their products and services, this has created new network architectures that can span the entire globe. On the one hand transport systems will need to adjust better to a globalizing economy, with a higher variation in different types of networks than ever before. Similar to other transportation modes, transporters of small parcels are focusing on global shipping needs. Small and mid-sized businesses are faced with new challenges in the global markets and are seeking to partner with a major company that can quickly help to set up international transportation networks. The splintering of flows that occurs due to the demands of customization and increased responsiveness will force firms to look outside their company borders for co-operation and, in the end, for scale. Thus, transport systems will need to be more flexible and obtain a more hybrid nature, to accommodate both slow and large scale flows as well as small scale, just-in-time shipments (see section 2 of this paper). In Europe there are only two modes of transport that have benefited from the growth of the European economy in the past period; those are road transport and short sea shipping. Both modes have profited from the opening up of the European market, the liberalization of transport markets more than the other modes. Especially the rail mode was not able to profit although it was heavily supported by supporting measures from the various governments and the EU. See figure 1.
4 Figure 1: Performance by goods transport in billion tonkm (DG TREN, 2003) Road Short-sea shipping Rail Inland waterways Pipeline
5 Figure 2: The importance of external relations for the Dutch economy (TNO, 2006) Development GNP, imports and exports (re-exports and produced in the Netherlands) ,0% 20,0% 18,0% 16,0% 14,0% 12,0% 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% -2,0% 20,1% 11,0% 9,0% 7,0% 7,3% 5,0% 3,8% 3,6% 3,5% 3,5% 2,5% 1,8% 1,2% 1,7% 1,5% -0,1% 0,4% -0,1% 0,5% Goods imports Goods re-export Exports produced in the Netherlands GNP The Netherlands The 10 world s largest importers and exporters in 2004 were Germany, France, The Netherlands, Italy, the UK and Belgium in Europe; China and Japan in Asia and the USA and Canada in the Americas. Most of these countries are able to balance the value of imported goods with that of export flows (which sometimes is resulting from exports of goods that have previously been imported but have changed ownership or has been transformed through adding value in the importing country) The USA is the main exception: it imports almost twice the value it exports (CPB, 2006). In the Netherlands a growing share of GNP has to do with imports and exports, see figure 2. This picture shows the growing importance in the period of the volume of goods that pass through the Netherlands with some value added, due to assembly, repackaging, or trade (TNO 2006). The growth of world trade directly influences the growth of maritime transport. In the early years this involved mainly the transport of raw material like oil and ores, but in recent years the development of containerized transport has been a major component of this growth. The development of containerized cargo has been impressive in the first years of this millennium. The total flow on the major routes almost doubled and the volume on the route Asia- USA more than doubled in a five year period. Also on the route Asia Europe a considerable growth can be observed: from 4.5 millions of TEU s in 2000 to 8.4 millions in See figure 3.
6 Figure 3: Containerized Cargo Flows along Major Trade Routes, (in millions of TEUs), (Rodrigues, 2005) Global container transport flows to and from the Northwest European mainland mainly move via six ports. From the total throughput of 32 Mio TEU that was transshipped in the le Havre Hamburg range in 2005, the port of Rotterdam was the biggest, with a throughput of 9.3 million TEU in total followed by the ports of Hamburg (8.1 million TEU), Antwerp (6.5 million TEU), Bremen (3.7 million TEU), Le Havre (2.1 million TEU) and Zeebrugge (1.4 million TEU). However, the position of Rotterdam is being threatened through the fast growing transshipment capacity of other ports in the Antwerp- le Havre range, see figure 4. The share of Rotterdam in the top 6, although by itself it has grown, has been declining since The strongest capacity increase is already realized in the years , in which the expansion amounts to 50%. Antwerp doubled its capacity in this time period especially through the realization of the Deurganckdock, and will become the largest container port in the Hamburg Le Havre range. The average annual growth of the ports from was 9%. In this time period, Rotterdam s market share went from 37% to 30%. The other ports increased their shares, especially Antwerp and Hamburg. Especially Hamburg has profited most from the growth of the Chinese exports (Source: TNO 2004, UA 2006).
7 Figure 4: Extension in container transhipment capacity in NW European ports ,5 7,2 5,4 3,5 2,0 Rotterdam Hamburg Antwerpen Bremen Le Havre 2003 ext 2004 ext 2005 ext 2006 ext 2007 But not only in Hamburg has the number of containers to and from China grown. Also in Rotterdam the number as more than doubled in 3 years time. This emergence of trade with China has lead to strong imbalances in the number of containers going to and from China. As a result of that the price of containers from China is double (1800 ) that of transporting a container from Europe to China (source TNO, 2006). In figure 3 the tremendous growth of imports from Asia in the period is shown, and especially the growth of imports coming from China: in almost grew with a factor 10 in that 10 year period. The share of Asia in the total imports from the Netherlands has grown 7% while the share of the traditional partners (Germany, Belgium, France, UK) has dropped 10% (CPB 2006, TNO 2006). Logistical developments and trends As a result of the increasing sophistication that is required for logistics systems to fulfill the increasing demands from their users (or clients from these users), there is a growing need for flexible logistics structures that aim for: Cost and asset efficiency Responsiveness towards changing customer requirements
8 Obtaining marketing advantage The first objective is forced even more by the last two, because only if logistic structures can be efficient, they offer feasible solutions in today s ever more competitive environment. Consolidation and Collaboration (horizontal as well as vertical cooperation between chain partners) are the most logical ways to generate lower cost per unit of freight. Through consolidation of flows, larger vehicles can be used and the loading efficiency is optimized. Through Collaboration also the planning of logistic activities is synchronized with results is a much smoother, seamless flow of goods through the logistic system, which results in higher utilization but also creates the possibility of using cheaper and slower modes of transport and avoids the need of safety stock (Groothedde, 2005). The high level of responsiveness that is required could possibly conflict with the above-mentioned need for slower and smoother flows of goods, but avoiding of this possible conflict is one of the biggest challenges in the design of logistic networks. The set up of hybrid networks (which create different possibilities for flows to reach their final destination), both for production, warehousing and transportation, creates the flexibility required. Part of the production with a demand pattern that can be predicted well in advance is produced on far away locations that use the low labor cost. The rest of the production is postponed to the last possible moment on locations close to the customer. There is a trend towards the increased usage of hybrid networks. Multimodal networks are a specific example of hybrid networks, especially if these modes are used in a parallel way and not only in a consecutive way. Hybridization occurs on all levels: production, inventory and transport. Through an overall planning and control mechanism shortcuts are created that enable consolidation of freight flows and enable fast and reliable delivery at the same time. These trends mainly emerge from increasing customer requirements, translated into shipper demand. In general the supply of transport is lagging behind and especially the old fashioned unimodal modes of transport that only try to optimize flows as they occur from station to station (that is, the railways), are not able to cope with this increasing requirements. Increasing transport prices due to internalization of external costs and increasing labor and fuel costs will lead to a higher emphasis on reducing transport costs and will increase the need to use cheaper modes of transport, if possible. Also possibilities to substitute transport costs for inventory costs, through using slower modes and lower frequencies of transport, will become more attractive.
9 The main driving forces behind these trends are the necessity to reduce costs in order to stay competitive in globalizing markets and the improved possibilities to control logistic processes using information and communication technology. Of course not everyone will welcome these innovations because they threaten existing market positions, and many of the more advanced ways of logistic organization not only rely on technology but also on trust. However the need to remove sub optimization in ever more competitive markets can only be realized if companies use the advantages of information that is available and make this information transparent to other partners in the supply chain. In many cases the existing level of information availability is insufficient to really optimize logistic processes. If however the need for optimization emerges because of cost increases or higher quality requirements, it is likely that these barriers will be overcome. One specific consequence of the emerging occurrence of hybrid networks is the stabilization in time of the logistic processes. Better planning leads to less uncertainty and the possibility to use slower but more efficient means of transport. The functioning of the network highly depends on the possibilities to synchronize the activities of each of the parties involved. Synchronization has to do with the timely and coordinated exchange of information between the parties enabling them to adjust their actions and avoid unnecessary buffers and disruptions of the flow. In order to achieve this one has to: Improve transparency along the supply chain. Improve forecasting and planning procedures. Reduce uncertainty in demand and supply. Create flexibility and avoid panic decisions. Create parallel sourcing possibilities. Especially in the hybrid networks advocated in the previous section, the level of exchange of information regarding upcoming events and the realization of planned activities has to be much more intense than in a decentralized organization where everyone is self reliant. In such complicated networks there is a need for a chain-manager that coordinates all related activities. Such a chain manager has to have some authority in order to force parties to work according to the service levels they have agreed upon. Valuable products with a very low demand frequency (C-goods) are stocked centrally and can be shipped quickly on long distances if the reduction in inventory costs outweighs the additional
10 transport cost of small lot sizes using express transport. The utilization of cheap and slow modes of transport in combination with faster means of transport can sometimes be much more advantageous than that of high speed expensive means of transport, especially for products with a low value density and with a high level of demand certainty. As such hybrid networks can combine the advantages of both network alternatives and thus create both a higher level of efficiency and flexibility. Examples of these type of solutions can be found in the Eutralog report (TNO, 2006). Note that in such a network the Logistic Service Provider (LSP or 3PL) plays a crucial role. This party has to make sure that the commercial contracts of the producers that have created a consortium to deliver their products in a synchronized way to their customers (the retailers) are performed according to the service level agreements they have agreed. This means that in order to work efficiently and effectively the LSP has to know what specific logistic agreements exist between all parties concerned, and has to know the orders and production plans timely in advance. Also he has to make sure that the utilization of the resources is optimized and that proactive action is taken if unplanned actions occur that obstruct the current plan. It is clear that such a hybrid network asks for a good coordination and synchronization of the actions of each of the partners in the logistics network. Trends in international freight transport in the near and further future Several models exist to forecast the development of freight flows on a global scale. The most recent European model is called TRANSTOOLS (http://www.inro.tno.nl/transtools/deliverables.htm), in which the expertise of several models and modelers is combined. For the Netherlands both NEA and TNO participate in this project. For DG TREN recently this model suite was used to make forecasts of the European freight flows up till 2020, also using different scenarios for European Transport Policy (TML 2005). In this model many of the trends that were described above in this paper are being reflected through endogenous variables or through exogenous parameters and assumptions. A number of outcomes for these scenarios are presented below.
11 Figure 5: Development in Export volumes for the EU 25 countries (source NDL, 2006) EU25 exports in 2000, 2010, 2020 in mln tonnes EU Exports in mln tonnes intra intra EU EU Reurope Reurope RoWorld RoWorld Asia Asia (China/India) (China/India) Total Total Figure 5 shows the total trade (all commodities) in millions of tonnes for a number of years. The main conclusion that comes out of this picture is, that although the growth rate of trade with Asia is growing tremendously, the majority of international flows to and from European countries remain within the European community. EU25 are main trading partners with a volume of 4 bln tonnes in The share of Asia (China/India) in EU trade is increasing in both imports and export, but remains small. The share of Asia in EU exports increases from 0.8 in 2000 to 3.6% in These results are in line with a recent study of CPB (2006).
12 Figure 6: The development of containerized transport as forcasted by Transtools (Source: TNO, Transtools intermediate results based of the European base scenario that is used for the Mid term review of the White paper (Assess study) and reported in NDL, 2006) EU25 imports/exports in 2000, 2010, 2020 in mln tonnes; containerised transport NSTR9 EU Imports and exports summed 2000, 2010, 2020 in mln tonnes of NSTR9 3,000 2,000 1,000 0 intra EU 25 Reurope RoWorld Asia Total , , , , , ,
13 In figure 6 the total imports and exports for NSTR Group 9 are shown. As we do not have a container indication yet, we use NSTR9 (finished products) as a proxy for international containerized transport. This picture shows that the share of Asia in EU imports increases from 1.4% in 2000 to 5.9% in So the important growth of Asian imports has to be looked upon in the perspective of the total imports from European countries, that still is dominated by imports from nearby countries. Also here the dominancy of intra EU trade can be observed. There is an import further growth of imports from Asia to be expected (from 40 to 223 Mio tonnes), but the share in the total amount of import and export still remain relatively small (it grows from 4% to 19%). The share of NSTR9 in total imports from Asia is already high 33% (in 2000) and remains high 35% (in 2020). The share of exports of NSTR9 to Asia decreases from 21% to 19% in In figure 7 the composition of the total external flows of the EU countries is presented by origin and destination. Also this picture illustrates the dominance of the intra European flows. Figure 7: External EU flows by Origin and Destination, in Mio Tonnes, 2020 (NDL 2006) European imports/exports in 2020 of NSTR9, by European origin/destination European imports/exports of of NSTR9 by region in in NorthWe German Landloc Mediterr st st y, y, ked ked Total anean Total Europe Denmark anean Europe Asia Asia (China/India) RoWorld REurope EU EU Asia (China/India) RoW orld REurope EU EU
14 References CPB, 2006, W. Suyker and H. de Groot, China and the Dutch Economy, Stylised facts and prospects, Document 127, The Hague Charles Rivers Associates, 2004, "Study on the Port of Rotterdam - Market Definition and Market Power", Boston European Commission, 2004, DG TREN, EU Energy and Transport in Figures, Brussels Groothedde, B., 2005, Collaborative Logistics and Transportation Networks. A Modelling Approach to Hub Network Design, Ph D Thesis, University of Delft NDL 2006, Wereldstromen, wereld kansen, Hoe Nederland grip krijgt op globalisering van produkten, produktie en logistiek, Zoetermeer Rodrigues, J-P., Hofstra University, see TML, (2005), Assess, Assessment of the Contribution of TEN and other transport policy measures to the mid term implementation of the White paper on the European Transport Policy for 2010, Leuven, see TNO 2004, Bogers, E and D. Henstra, State of the art of Intermodal Freight Transport, Eutralog deliverable 4.1., Delft TNO 2006, Kees Verweij, De logistieke Kracht van Nederland, report for NDL, Zoetermeer UA, E. van de Voorde, Lecture at Tias Business School
15 IMPACT OF THE GLOBALISATION ON LOGISTIC SERVICE PROVIDERS IN BELGIUM I. Cornillie, Vrije Universiteit Brussel (Vakgroep MOSI-Transport en Logistiek) C. Macharis, Vrije Universiteit Brussel (Vakgroep MOSI-Transport en Logistiek)
16 Introduction The setting of this paper is the impact of globalisation on today s economy and more specific on the sector of transport and logistics. The globalisation process has been recognized as one of the main underlying forces impacting logistic service providers (Lemoine, 2005). The definition of globalisation passed on by the International Monetary Fund (IMF), the growing economic interdependence of countries worldwide through increasing volume and variety of cross-border transactions in goods and services, freer international capital flows, and more rapid and widespread diffusion of technology, illustrates that the globalisation wave is a combined process of various actions and trends. As a consequence the measurement of the impact of globalisation on logistic service providers (LSP s) is a complex research problem. The world has become one global village interlinking businesses and their supply chains all over the world. Today companies (shippers) need to orient their business outside the borders of their home country and control their costs to survive the fierce competition. Cost control generally means cutting down unprofitable business units and focussing on one s core business. Therefore off-shoring parts of the value chain to low-cost countries and outsourcing parts of the value chain - in particular tasks that are catalogued as secondary activities such as logistics - are general adopted ways of organising business today. Following to this trend an increasing amount of supply chain activities are transferred to the logistic service providers (LSP s). Following to the internationalisation of the economy value chain activities (sourcing, production, manufacturing and sales sites) are spread out all over the globe. The expansion of Europe and the growth of China and India towards important economic entities are changing the face of logistics. Outsourcing and off-shoring activities drive the complexity and longitude of the supply while complex supply chains fuel the need for efficient international logistic management. It is a self-propelling process. In order to be efficient logistics needs to operate crossing company borders with all agents of the supply chain. Monitoring the supply chain from source to consumer is a constant quest for optimisation. International success is guaranteed by the continuity of the supply chain and sharp control of the logistics costs, improving customer and shareholder satisfaction. This is true for both the demanding parties (shippers of goods) and the supplying parties (logistic service providers). Efficient logistics is considered as a strategic priority to compete in a globalized economy. Therefore the management of relationships between shippers and LSP s is crucial. 60% of Fortune 500 companies in Europe have at least one contract with a third party logistics provider (Eyefortransport, 2006). Next to international orientation of business and cost control LSP s also need to monitor the market and track the needs of their customers (shippers) in terms of competitive value proposition. Nowadays their exists a wide proliferation of products with shorter product life cycles and an increased rate of product innovation resulting in an increased movement of goods. In this world of
17 high variety and volatile demand leanness of logistic processes (Just-in-time, quick response, elimination of waste, forecast driven business models) is insufficient. Within this context the move from lean to agile supply chain management skills is key (Harrison and van Hoek, 2005). While lean means containing little excess; "a lean budget", agility means moving quickly and lightly; "sleek and agile as a gymnast". That s what shippers expect from their LSP s today, demand-driven, information based instead of inventory based and most importantly a high rate of agility. The aim of this paper is to reveal the strategic choices and ways of responding to the globalisation wave by the LSP s located in Belgium. The case of Belgium is being chosen as Belgium serves as one of the most important logistic gateways for Europe. Methodology To measure the impact of the globalisation it is designated to track the evolution of activities, list the current service offer across industry segments and track the presence across several diverse regions of the world. It is important to understand how LSP s were organised in the past, how they operate today and how they envisage the future in terms of service offer, international presence and organisational structure. This dynamic approach will reveal the new challenges LSP s are opposed to following the globalisation process. Weather LSP s focus on few industry verticals or various industries and weather they have a global, regional or local orientation are both crucial questions in this research. To answer these research questions a bottom-up approach is applied in this research setup starting with the analysis of the trends and strategic choices via a two-folded market research. First, a qualitative market survey was conducted during the months April and May Second, a large scaled survey targeted at logistics managers is planned in the months of October-November of this year. This paper delivers the results of the first part of the research. Twenty in-depth interviews were realised with a variety of small (5), middle sized (6), large (5) LSP s and federations of the transport and logistics sector (4). The targeting of the respondents was based on the directory of LSP s in Belgium constituted by Truck and Business, completed with own desk research. The results of both qualitative and quantitative market surveys will be mapped in order to find conclusive strategic choices. Porter s Diamond of National Advantage (factor conditions, demand conditions, firm strategy, firm structure and firm rivalry) and the diagram of Porter s Five Forces (rivalry, threat of substitutes, buyer and supplier power, barriers to entry) were used as a framework for interview guidance (Porter 1980, 1990) (see figure 1).
18 Figure 1: Porter s Diamond Model and Diagram of Five Forces Source: Literature review A lot has been written from the perspective of customers (shippers) who use LSP services. This is the main focus of surveys conducted by consultant companies such as Capgemini (Annual Third-Party Logistics Study) and Computer Science Corporation (Annual Global Survey of Supply Chain Progress). Our objective is to identify key trends and strategic choices within the logistics industry from the perspective of LSP s. According to the 10th Annual Third-Party Logistics Study, LSP s mainly offer tactical services while customers seek close collaboration and strategic views. An important finding of this study is that price has become the main differentiator despite of value added services. This study was conducted by Capgemini and the Georgia Institute of Technology and covered North America, Western Europe, Asia-Pacific, Latin America, South-Africa and the Middle East (Capgemini, 2005). The Outsourcing Logistics report (2006), issued by Eyefortransport concludes that service reliability is more important than price. The reason for this contradiction is that in this study both shippers and LSP s are interviewed, the latter putting services above price as competitive differentiator. Similar findings were noted in a study conducted by the Belgian institute for road transport (Instituut voor wegtransport, IWT) in They state that traditional transport (transport from A to B at an agreed rate) is in ongoing transition towards logistic management and oriented to value added logistics. While price is the focus within the sector of traditional transport, delivered services and quality are as important as price within logistic management. This is in contrast with the previous study were service was stated to be more important than price. It is clear that the pressure on LSP s is high and that both price along with enhanced service proposition (moving up the value chain), are important factors to compete with existing players and new entrants. The following citation shows more is expected from the LSP s: If our 3PL has a close
19 cultural fit with Unilever, if it delivers added value to the relationship, and if it continues to get the basics of service, safety and cost right, then there s a good chance we will renew the contract, explains Rod Turner, operations and distribution Manager of Unilever (Eyefortransport, 2006). The important strategic issue LSP s are confronted to today is to decide how to operate in a global interdependent marketplace. They need to choose what kind of organisational mode to apply to their business. Lemoine (2005) identified five external (environmental uncertainties, host country specific conditions, competitive environment, ICT and customer demands) and five internal (firm size, experiential knowledge, financial resources, skills and culture) factors related to the LSP s as decisive elements for strategic choices. LSP s have used a wide range of organizational modes in order to survive the fierce competition and perform activities in the international markets. Ranging from arm s length agreements (nonformalised) mainly applied for low value transactions (transport from A to B), to transitory alliances (short termed collaboration agreements), working partnerships (contractual relationship for a short to medium term with a low degree of sharing information, resources and funding) to strategic alliances (long term, formalised and based on win-win principle with a high degree of sharing risks and profits) and joint ventures. Within the latter mode efforts are combined between 2 or more LSP s and activities are performed under a common name (Lemoine, 2005). This wide range of organizational modes can be based on horizontal or vertical agreements. Horizontal agreements exist between LSP s (intra-industry) and aim at increased bargaining power via the acquired access to complementary skills and new markets. Vertical agreements exist between the shipper and the LSP. In the end the evolution of business proofs that alliances and joint ventures evolve towards mergers and acquisitions in most of the cases because complex collaboration modes are time-consuming. In general LSP s seek to expand their service offer and increase their international presence to maintain competitive advantages (Lemoine 2005, Verstrepen 2005). In the next sections the LSP landscape will be illustrated followed by the case of Belgium. Logistic Service Providers The LSP landscape is characterised by increasing consolidation, pressure to cover the global market (follow the shipper, reactive attitude) and pressure on profits. These elements build a highly fragmented and competitive West-European logistics market (Verstrepen, 2005). By its nature the demand for transport and logistic activity is a derived demand because of its strong relation to the demand for movement and treatment of goods, driven by internationalisation and economic growth. Next to the growing demand for transport, LSP s are faced to the growing demand for coordination and management activities of larger parts of the supply chain.
20 Enhancing logistics partnerships, with improved communication and/or the development of effective relationship management is crucial to survival. In the following section the position of LSP s will be analysed. Positioning Coordination of the supply chain activities along with the collaboration across agents and LSP s has become so important that fourth party logistics providers were created to do the job. The figure below illustrates the positioning of LSP s in terms of level of outsourced activities and level of collaboration. Over the years there has been an evolution from first party logistics (1PL) to 2PL, 3PL and 4PL service providers. Figure 2: Positioning of LSP s Level of Outsourcing Management & Control Organization& VAS 3PL 4PL Future: ICTbased broker Transport 20%, Logistics 80% Operational tasks 2PL Transport 100% 1PL Vertical integration Focus on costs / Short term Level of collaboration Shared risks & profits / Long term Source: own setup based on Vannieuwenhuyse, 2003 Most authors classify the LSP s based upon the level of outsourcing activities, service package and level of collaboration (Van Mierlo and Macharis, 2005). According to Visser (2004) four types of LSP s can be identified: 1PL: Here we refer to the shipper, organising and executing all of the logistic activities autonomously, all activities are done in-house (100% in-sourcing). 2PL: The shipper (demanding party) uses a subcontractor to execute transport activities. The 2PL is responsible for clearly defined operational tasks. 3PL: Following to the outsourcing trend during the eighties 3PL s entered the LSP arena next to 2PLs. They offer value added services such as governance of the supply chain (order management, custom clearance,...) along with solutions for improvement of operational performance. A long-term relationship between the shipper and the LSP is preferable in this setting. Traditional tasks such as transport is outsourced to 2PL s.