Logistics industry: costs are exploding – what that means for consumers

NJust once to understand the dimensions at the beginning: In the ports of Ningbo-Zhoushan in China and Los Angeles in the USA, around three percent of the global freight capacity is currently stuck in the waiting areas. Dozens of container ships have to wait there to be processed.

The freight volume in the Red Sea, the most important trade route for sea transport between China and Europe, is currently 14 percent lower than in other years at that time.

According to the Kiel Institute for the World Economy, the ongoing traffic jams in front of globally important container ports are leading to a stagnation of global trade. At the same time, this is the background for an explosion in transport costs, especially between Asia and Europe – up to a tenfold increase in freight rates.

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Logistics is considered to be an early indicator of the global economy and future developments. It is becoming increasingly clear that industrial companies will react to the chaos in transport across the oceans. The global logistics group Dachser surveyed around 640 international customers and gathered information about their planned measures.

Dachser CEO Burkhard Eling

Dachser CEO Burkhard Eling

Source: Burkhard Eling / Dachser

“There is uncertainty among our customers that I have never experienced before,” says Dachser CEO Burkhard Eling in an interview with WELT. Many companies have to contend with failures at suppliers of preliminary products.

The reactions to this, however, are different. Some are increasing storage capacities in Europe, while others order primary products from multiple suppliers instead of from one source. Still others are relocating parts of production, either closer to the sales markets or back to Europe.

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“In the automotive and chemical industries, companies are trying to relocate production to the region,” says Eling. These companies wanted to change production in the long term and manufacture where they had the largest sales markets. However, this takes time. “The supply flows cannot be changed overnight, however,” says Eling.

“In the hardware store sector, on the other hand, companies are expanding their warehouses and using extensive warehousing to prevent bottlenecks in deliveries from Asia, for example,” says Eling. The logistics company registered an increased demand for warehouse locations in Europe.

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With around 5.6 billion euros in sales and 30,000 employees, Dachser is one of the leading European logistics groups and is represented in all regions of the world.

In the textile industry, on the other hand, production is being relocated back from the Far East, for example to Eastern Europe or to the Maghreb countries in North Africa. According to the findings, around 70 percent of the customers surveyed are thinking about changing the supply chains. “Trade wars, climate change and the pandemic are events that will not be gone tomorrow,” says Eling.

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Rather, this triggers structural changes. “In the past, supply chains had to be inexpensive and efficient. What counts now is reliability, quality and transparency, ”says Eling. Associated with this, however, are cost increases and price increases for customers in an online shop, for example. “Consumers have to be prepared for the fact that the cost of the end product will rise. Ultimately, the provision of the goods becomes more complex, ”says Eling.

It is questionable whether the pace at which the orders are received by customers will be maintained over these changes. At the moment, an extremely high effort is being made to ensure that the customer receives the goods quickly. “This will no longer be achievable to the same extent everywhere when the supply chains are restructured,” says Eling. The expectations of customers must also change here.

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In detail, 40 percent of the companies surveyed say that they had to accept “significant logistical bottlenecks and losses” in the Corona crisis. In response to this, 30 percent of customers are now planning structural changes and adjustments to the supply chains. But most of them take their time: only one in five of the participating Dachser customers has already made changes.

The motives for the restructuring of the delivery flows are partly new. Safety, flexible transport solutions, cost savings and improvement of efficiency are the stated goals of the companies for the restructuring of logistics.

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Dealing with customs disputes and sanctions are less important. According to this knowledge, sustainability in supply chains is currently not a hot topic either. In any case, the company’s view of logistics is changing significantly.

In the past, the supply chains just had to work. “A detailed interest in the finely woven gear train was manageable,” says Eling. Often this was “more of a question for engine room experts”. Now the board members seem to be moving into these rooms themselves.

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