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How will Corona change the European distribution system?

How will Corona change the European distribution system?

Blog: Corona impact on European logistics, update May 18, 2020

Last week, HIDC organized an online event with specialists from Erasmus University, ING Bank, research institute Panteia and Transport & Logistics Netherlands (TLN). An insightful meeting to say the least. We challenged the speakers to bring out their crystal balls and tell us how the current crisis will change European logistics and the distribution system. This update will share their views, as well as other sources that go into the same topic.

This is the eighth Corona update of HIDC (previous seven updates can be found here) on the continuity of European logistics.

‘The Great Unwinding’ and regionalization of global supply chains
The Economist states in its report titled ‘The Great Unwinding’, published last week: “Covid-19 will fundamentally reshape trade, accelerating the trend towards shortening supply chains. Just-in-time manufacturing using global suppliers will give way to a greater focus on use of regional supply chains, strategic use of inventories and a new approach to viewing risk in the C-suite.” This can’t happen overnight but surely manufacturing companies have mapped their supply chains and are in the process of finding alternatives for their ‘high-risk’ or distant production locations and suppliers. Similarly, the panelists at our event expect that many companies will build supply chains that are quasi-independent in Europe and North America, fueling the near- and reshoring trends that were already in motion. The double digit trade growth between the Netherlands and Eastern Europe is an indication of this trend, according to panelist Bart Kuipers, port economist at Erasmus University, and is expected to sustain.

Building stock in strategic places regains importance
A second effect could be the re-valuation of building stock. Where supply chain best practices have been about optimizing the logistics process to minimize storage costs, now multinationals will put greater weight on the risks this brings. As The Economist states: “In the current crisis, companies are seeing greater value in storing inventory in strategic locations from where it can be easily accessed and delivered to customers.” A strategic location is a low risk location, close to the market, with a strong political, economical and infrastructural environment. The graph by Eurasia Group, published last week, shows that the Netherlands is a ‘top performer’ on these factors.

The panelists at last week’s event therefore see a shift from “Gateway the Netherlands” as an efficient instrument to distribute China-based production, to the Netherlands as “a key logistics hub” for regionalized supply chains and strategic stockpiling. Furthermore – and not directly related to the coronacrisis – major opportunities for the Netherlands will come from circular supply chains (repurposing ‘waste’ streams) and more value add close to the customer which will increase the economic value of the sizeable Dutch logistics sector.

Will e-commerce drive the Dutch logistics top position in the future?
The panelists also conclude that container volume growth in the Netherlands is mostly driven by e-commerce. More and more brands and platforms are using the Netherlands as their pan-European fulfilment hub, due to its world class infrastructure, business environment and central location between Europe’s main markets Germany, UK and France that can be served within 48 hours. Brands are quickly redesigning their supply chains to serve the European consumer directly, now that they are getting their essential and lifestyle items online. This Wednesday, May 20, HIDC organizes a webinar around the topic of ‘e-commerce and e-fulfilment opportunities in Europe in times of social distancing’, for which you can register through the event page.

In the meantime, if you have questions about fulfilment, logistics, taxes or anything else supply chain related, HIDC will continue to offer free advice and matchmaking services without any obligations. Please contact us out for any questions or queries.

May 19th 2020

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