How resilient is logistics and how did this industry perform during the pandemic? Those were the key issues discussed online last Wednesday (05MAY21) during the Munich-held trade fair, Transport Logistics. On stage sat concentrated female power: Dorothea von Boxberg, CEO Lufthansa Cargo, flanked by Sigrid Nikutta, Head of the Executive Board DB Cargo, and Andrea Eck, responsible for automotive logistics at the BLG Logistics Group. State Secretary Tamara Zieschang was connected from Berlin’s Ministry of Transport, and the moderator was Julia Löhr from the daily Frankfurter Allgemeine Zeitung (FAZ).
In summary, three words describe the logistics industry in the face of the pandemic: smart, agile, and resilient. It has proven its robustness during the pandemic by keeping intercontinental supply chains running and ensuring the supply of essential goods to the people. Many firms responded to the pandemic at high speed, developing innovative solutions to transport urgently needed goods practically overnight, and doing their utmost to protect their own staff from infection.
CEO Dorothea von Boxberg of Lufthansa Cargo tabled two examples: Firstly, the decision to operate so-called preighters in order to quickly up urgently needed freight capacity to fly face masks, medical products, test kits and hygiene items from manufacturing sites in China to Europe and the U.S. Secondly, Lufthansa Cargo turned the Siberian Airport Novosibirsk into a hub, enabling crew changes and fuel stops for Lufthansa deployed preighters. “Our colleagues rolled up their sleeves and set up the hub in practically no time," Ms. von Boxberg applauded. The step followed the almost complete suspension of passenger flights after the pandemic broke out in March 2020. Consequently, practically overnight, Lufthansa Cargo lost the lower deck capacity of Lufthansa’s passenger fleet, accounting for roughly 50% off the freight carrier’s overall transport offering.
Resilience pays off
Similar to Lufthansa Cargo, freight trains ran also without hiccups as proven almost daily by the smooth train sequences on the Trans-Eurasian route between China and Europe, said Head of DB Cargo, Sigrid Nikutta. Her company, like Lufthansa Cargo, is one of the winners of the crisis. "We have gained many new customers in cross-border European traffic, because of our dense network, reliable schedules and due to the fact that a single cargo train replaces 52 truck trips in terms of volumes.” The next customer is just around the corner: Deutsche Post/DHL plans to successively transport a steadily increasing amount of letters and parcels within Germany by rail - driven by its climate-friendly "Go Green" policy
Conversely, the pandemic posed and keeps on posing major challenges for car manufacturers, Andrea Eck described. For example, VW, BMW, or Mercedes cannot finish manufacturing their vehicles due to a lack of semiconductors. These are contributed by 3rd or 4th tier partners located all around the world who became victims of the capacity squeeze in air and ocean freight. "We have rented huge areas in the vicinity of seaports to temporarily park the incomplete cars there. After the semiconductors arrive, they will be installed right on the spot," Ms. Eck said.
Local or global sourcing – or a combination of both?
The car example illustrates the vulnerability of entire industries when traditional supply chains are suddenly torn apart. In that case, resilience and agility do not help much.
This led the panelists to discuss whether it might be better to produce more goods locally instead of relying on Chinese firms and other far-off suppliers. Their unanimous answer: Home sourcing makes sense for high-tech and system-relevant products, including vaccines or pharmaceuticals, but not for bulk goods such as face masks, for instance. “In case of mass products, we can never achieve competitive prices in Germany and most European countries," warned Ms. Zieschang of the Ministry of Transport. The example of green hydrogen also speaks a clear language of how interdependent world trade is and will presumably remain being, she said. In future, hydrogen will become an important energy due to incredibly low CO2 emissions during production. In sun-rich regions like Morocco or other Arabian places, large photovoltaic plants can be installed, able to produce hydrogen power much cheaper compared to European sites. “We are dependent on them, they are dependent on us,” resumed Mrs. Zieschang, reminding that nobody came up with the idea to insource oil and gas production to reduce European dependence of Saudia Arabia, Qatar, or other fossil fuel rich states.
What are the lessons learned from the discussion?
A European green lane concept is needed. No truck should wait longer than 15 minutes to get the custom officials’ go to cross an intra-European border.
Brussels must urgently table a pan-European transport scheme including all modes of transportation and interconnectedness of rail, road, air, and sea.
The EU’s regulatory framework, including individual rules existing in its member states, is still too bureaucratic and needs to be simplified to enable the logistics industry to become faster and more agile.
And especially in times of crisis, a hands-on mentality is needed from all parties involved, including politics and customs. A field that still offers much room for improvement.
Finally, all the logistics experts on the panel agreed that resilience in logistics chains also requires a solid physical and digital infrastructure. Investments in fiber-optic networks and 5G are therefore absolutely essential, especially on transport routes, at transshipment and logistics hubs.
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