Logistics Development in

Western European Strategies

Abid Hossain
ID: 13302161
 Introduction
Several Political Initiative
have taken place that had
major implications for
logistics services
Austria, Finland and
Sweden joined EU on 1
Jan 1995 , increasing the
member of states to 15
Euro became legal tender
on Jan 1, 2002 and which
has been implemented in
17 of the 28 EU member
states .
1
Bulgaria and Romania
joined in 2007 taking the
total to 27 countries

1993 1999 2004 2013

1990 1995 2002 2007

Broder control and
customs arrangement
turn into single European
market under the Treaty
of Maastricht in January
1993
Euro was launched as
an electronic currency
Ten more countries
joined on may 1, 2004
taking the total to 25
Croatia joined in 2013
taking current
membership to 28
countries and a
combined population if
500 million people.
 European Union 2

 Logic of creating EU free from unnecessary restrictions which ultimately help

the EU companies to compete on a global basis.

 It is often claimed Fragmented national economies within Europe have

resulted in too many small companies in certain key industrial sectors.

 Dismantling barriers to trade and opening up new opportunities allows

companies to grow and become more competitive.

 The collapse of communism in the country of the Central and Eastern Europe
and the subsequent orientation of these countries towards the free market ,
has also opened up new avenues of trade that extend the beyond the border
of the EU.
Changes in the demand for logistics Services 3

 Markets for goods and services in Europe have become much less
fragmented
 Companies increasingly regard the EU as their home market rather
than having their trading horizons restricted to a single country

For example: Increased trade between member states creates new

demand for logistics and services.
 Transport
 warehousing
Market development & retailer strategy 4

- Increasing market integration enables large Companies to take

advantage of their size
- They started production for separate national markets
- Abolition of border controls encouraged plant and warehouse
rationalization such as : reducing the number of warehouses.

- Many large Companies now take a supply chain view when considering
new ways to:
1) Integrate their own operation
2) Then seek to extend this integration to their supply chain
partners.
Market development & retailer strategy 5

- The survey of logistics costs carried out by the European Logistics

Association (ELA) and ATKT has indicated that costs as a proportion of
sales fell by approximately 50% for Western European Companies
between 1987 and 2003.

- Also the "annual establish Davis database of logistics cost" indicates

that logistics cost as a proportion of sales have not fallen further since
2003. Instead the rose from approximately 8% in 2003 to 10% in 2007,
before falling back to 8% in 2013.
Ahmed Ullah Khan
ID: 13302142
Limitations on European integration 6

- The retail format used in different European markets varies significantly

between countries. As a result, the total number of stores operated by
retailers vary between European countries.

- In addition, pattern of consumption also vary widely between European

countries for a range of cultural, demographic and economic reasons.

- As many companies will continue to strengthen their European

initiatives, resulting in further dramatic changes to their European
logistics network- this in turn places new demands on logistics managers
and logistical services.
Eastern Europe and distribution central locations 7

- As “Landers Notes”, an increasing number of manufacturers have

relocated from Western Europe toward Eastern Europe.

- In turn, there is a strong expectation that European distribution

functions will also move eastwards from their present concentration in
the Netherlands
Market structure of logistics service Providers 8

-Changes in demand for logistics services in Europe creates a challenge

for logistics service providers as they are working with a range of
companies all moving at different speeds.

Company size and response to international

Opportunities

Internationalization among larger Carriers

Company Size and Response to International Opportunities 9
- Company size have a special significance in deterring the response to opportunities
created by an enlarge EU

Larger logistics providers: They have the opportunity to continue to internationalize

their activities to provide full national distribution services in more than one country

Small Logistics Provider: The impact of EU are far more limited as they don’t have the
capacity to extent their activities

Factors that influence logistics companies:

Company Culture and Background : The size of the company and their ability to absorb the financial and
management consequences of rapid change

Customer Profile: Speed of reaction to European opportunities

Customer Culture: The customers of logistics service provider could either purchase service at the
European level or on a national basis
Internationalization among large carriers 10

The way logistics service providers can enter into foreign markets
 Establishments of operating centers
 Merger
 Strategic Alliances
Strategies
-Service providers need to determine the extent to which they can meet all the service requirements
or realistically only meet part of those needs

-Logistics service providers needed to be concerned with two dimensions to their activities and these
dimension highlights how challenging it is for logistics service providers to provide ‘one stop
shopping’
 Geographical scope
 Range of Services
Internationalization 11
Logistics Activities among large carriers
Broad range of logistics activities can be provided by logistics service providers

Main Activities
 Freight Transport
 Warehousing
 Documentation

Expanding Services:
 Final assembly of products
 Inventory management
 Product and Package labelling
 Product Tracking
 Order Planning and Processing
 Reverse Logistics System
Asiful Haider
ID: 13302174
 1
Transportation in Europe 12

European Freight Activity

Policy measures affecting logistics and transport in Europe
European Freight Activity
13
Growth in Freight Transport in Western Europe
4500

4000
Billion tonne KM
3500

3000

2500

2000

1500

1000

500

0
1995 2000 2005 2010
Road Rail Inland Waterways Pipelines Sea
 Trends in Market Share 14

1995 2000 2005 2010

Road 42% 43% 45% 46%
Rail 13% 11% 10% 10%
Inland 4% 4% 3% 4%
Waterways
Pipelines 4% 4% 3% 3%
Sea 38% 38% 38% 37%
Total 100% 100% 100% 100%
Integration Effect 15
For example, the EU countries trade four times more foodstuffs than other countries with
identical production and consumption levels – and this has important implications for
logistics demands.

Increase in Demand of Transportation Services

Due to:
• Rationalization of both production and stockholding sites among some large companies.
• Implementation of just in-time (JIT) production techniques.

Result in:
• Increasing trip length
• Greater frequency of deliveries.
Developments in logistics and the impact on transport and traffic 16

Main Development Impact on transport and traffic

Modal shift towards road
Spatial concentration of production and
warehousing
Adoption of JIT in manufacturing
Adoption of quick response and ECR in retail Smaller shipments, faster transport (road),
distribution
Wider geographical sourcing of supplies
Wider geographical distribution of finished
product
Demand-driven flows lead to increased
number of trips, decrease in transport
efficiency
Longer distances, increase in transport
volumes on key routes
Smaller shipments, faster transport (road),
decrease in load factors
decrease in load factors
Raw materials and components transported
over greater distances
Finished products transported over greater
distances
Main Development
Supply chain integration
Decrease in order cycle time
Increase in assortments
Reverse logistics
Retail market concentration
Impact on transport and traffic
17
Decrease in number of suppliers and
transport providers, increased road
transport in the case
of more outsourcing
Demand-driven flows lead to increased
number of trips, decrease in transport
efficiency
Smaller shipments, increased number of
trips
Additional transport of waste materials
and
end-of-life products
Fewer, larger out-of-town stores;
encouraging
the use of car journeys for shopping
Policy measures affecting logistics and transport in Europe 18

European Commission White Paper on Transport (2011)

Identified the importance of mobility for economic growth and the quality of
life of citizens.
The White Paper goes on to note that although transport enables economic
growth and job creation it must be environmentally sustainable.
Identifies both old and new transport challenges in the EU, and asserts that
these will need to be addressed through a combination of:
• new transport infrastructure requirements
• the use of traffic and logistics management and information systems to
ensure more efficient use of existing infrastructure
• new vehicle technologies
White Paper lists 10 goals 19

• Halve the use of ‘conventionally fuelled’ cars in urban transport by 2030; phase them out in
cities by 2050; achieve essentially CO2-free city logistics in major urban centres by 2030.
• Low-carbon sustainable fuels in aviation to reach 40 per cent by 2050; also by 2050 reduce EU
CO2 emissions from maritime bunker fuels by 40 per cent.
• 30 per cent of road freight over 300 kilometres should shift to other modes such as rail or
waterborne transport by 2030, and more than 50 per cent by 2050.
• By 2050, complete a European high-speed rail network. Triple the length of the existing high-
speed rail network by 2030 and maintain a dense railway network in all member states. By 2050
the majority of medium-distance passenger transport should go by rail.
• A fully functional and EU-wide multimodal TEN-T [Trans-European] ‘core network’ by 2030, with
a high quality and capacity network by 2050.
• By 2050, connect all core network airports to the rail network, preferably high-speed.
White Paper lists 10 goals 20

• Deployment of the modernized air traffic management infrastructure (SESAR) in Europe by 2020
and completion of the European Common Aviation Area. Deployment of equivalent land and
waterborne transport management systems. Deployment of the European Global Navigation
Satellite System (Galileo).
• By 2020, establish the framework for a European multimodal transport information,
management and payment system.
• By 2050, move close to zero fatalities in road transport. In line with this goal, the EU aims at
halving road casualties by 2020. Make sure that the EU is a world leader in safety and security of
transport in all modes of transport.
• Move towards full application of ‘user pays’ and ‘polluter pays’ principles, and private sector
engagement to eliminate distortions (including harmful subsidies), generate revenues and
ensure financing for future transport investments.
Policies encouraging the use of rail, inland waterway and short-sea shipping 21

• The European Commission hopes to achieve higher freight mode shares for on-road modes
through a combination of measures to achieve two key objectives:
• regulated competition between modes
• the integration of modes for successful intermodality
• The White Paper argues that transport charges and taxes must be restructured
• White Paper intends to create the necessary framework to permit the tracing of goods in real
time, ensure intermodal liability and promote clean freight transport.
• At the international level, the European Union is continuing to implement its Trans-European
Network (TEN-T) program (European Commission, 2013c).
• The policy was refocused in 2013 and is now based on nine major long-distance corridors.
• The core network has a heavy emphasis on rail, inland waterway, sea and cross-border
connections, with a limited focus on road schemes.
Policies encouraging the use of rail, inland waterway and short-sea shipping 22

• European Union has therefore promoted the concept of ‘motorways of the sea’, which is a
component of TEN-T (European Commission, 2006) and focuses primarily on the movement of
freight. Four corridors have been identified for the development of projects that aim to:
• develop more efficient, more cost-effective and less polluting freight transport
• reduce road congestion at major bottlenecks across Europe
• provide better quality, more reliable connections for Europe’s peripheral regions
• assist in making Europe’s economy stronger and more sustainable
Policies encouraging the use of rail, inland waterway and short-sea shipping 23

• Particular issues exist for rail freight operations, which have been slow to adapt to the Single
European Market.
• Policies have been developed to encourage rail freight to become more competitive. These
include:
• Open and non-discriminatory access to infrastructure for rail freight service providers so as
to stimulate competition,
• Transparent pricing regimes
• Interoperability between national transport networks
• The development of priority rail freight corridors and quality assurance standards for
freight services
Other policy measures affecting road freight transport 24

Time or distance-based road-user charging for goods vehicles

• Charging schemes in place of annual license fees for lorries
• To relate the charge to the usage of the vehicle
• Therefore better reflect the costs that they impose when using roads.

The strategy for near-‘zero-emission urban logistics’ by 2030

• In its 2011 White Paper, the European Commission has outlined its strategy to
achieve near-‘zero-emission urban logistics’ (European Commission, 2011).
• This will involve producing best practice guidelines and regulations to better
manage and monitor urban freight goods flows and associated transport activity
The strategy for near-‘zero-emission urban logistics’ by 2030 25

Possible actions to achieve this target could include:

• The use of urban consolidation centres and other means of improving load consolidation
• Rethinking the size of vehicles used in urban centres
• Retiming of delivery activity to the off-peak
• Various regulatory limitations on time and space
• The increased use of low-emission road vehicles
• Integrated land use and transport planning
• Improved rail and river access to stimulate the use of non-road modes
• Knowledge transfer and the sharing of business practices
• Improved provision of traffic and other information
• Revised vehicle technology standards
 Rahul Sharma

Id No: 13302135
Opportunities and pressure for logistics providers in a new Europe 26

Many multinational companies are rationalizing the number of logistics service providers they
deal with across Europe- in much the same way as they have rationalized their production and
warehousing operations.

This, altogether with the growth in intra-European trade, leading to greater demand for transport
and logistics services. Political changes have opened up new geographical markets, both for
production and consumption. International transport companies engaged in cross-border
European work already realized that strategies may need to be tailored to the respective country
of operation.

So, devising and implementing the right logistics strategies lies at the heart of
successfully capitalizing on these commercial opportunities available in Europe.
 27
Naturally, what is right for one company will not be right for all. In particular, there lies
important differences between the sort of strategies and initiatives that need to be devised by
larger companies and those of smaller ones.

Strategies for larger logistics service providers:

 Strategy A (pan- European):- providing a Europe-wide service offering distribution both

within and between a number of European countries.

 Strategy B (multi-domestics):- foundations of this strategy appear to lie in the successful

duplication of domestic services in European countries.

 Strategy C (Eurolinkers):- providing a network (or part of a network) of mainly

international services between major European markets.
 30
Country A

Pan-European

Country B Country C Country D

Figure: Network Implication of Each Strategy

 30
Country A

Multi-Domestic

Country B Country C Country D

Figure: Network Implication of Each Strategy

 30
Country A

Eurolinkers

Country B Country C Country D

Figure: Network Implication of Each Strategy

 28
Strategies for small- sized service providers:

 operate either at local level or work for a few companies

 limited scope

Strategies for medium- sized service providers:

 they need to find ways to tie their operations into those of their customers so that they
become a vital part of their customers’ distribution operation.
Conclusion: 29

 Cost-effective systems of good distribution are often argued to be an essential prerequisite

for competing in international markets and for delivering a good standard of living at a national
level.

 Logistics can be viewed as critical to economic success in manufacturing, retailing and

service industries in Europe. In addition improved logistics strategies promote higher service
levels & reduced costs.

 Logistics management and supply chain strategies play a critical role in the competitiveness
of firms too. Indeed it has been argued that increasingly competition is between supply chains
rather than individual enterprises.
 30

 A number of logistics developments have tended to increase the consumption of transport

services within the supply chain. This can occur as a result of either increasing trip length or
greater frequency of deliveries.

 Therefore, ways need to be found to encourage more companies operating in Europe to use
logistics approaches and to ensure that those approaches that contribute to sustainability become
more widely disseminated.
Thank you