Stefan Krauter sees clear trends of nearshoring and reshoring

CFG: In its survey, the Frankfurt-based DZ Bank observes a trend among small and medium sized industrial companies based in Germany and central Europe to redefine their supply chains for minimizing risks by near shoring activities. Does cargo-partner that runs many stations in Central and Eastern Europe already see first signs of this new trend?

SF: The idea of "near shoring" came up within weeks following the outbreak of the COVID-19 pandemic, when passenger flights were suspended and air freight costs multiplied. Since then, freight costs have returned to normal, but repeated lockdowns in China and, of course, the conflict in Ukraine have once again prompted production moving to Europe. But it's not as simple and easily feasible. Location and supply chain decisions are usually multifaceted and very long-term.
Within Asia, there have already been reshoring trends for some years, i.e. a reallocation of less complicated production, for example from China to Southeast Asia, in particular to Vietnam and Thailand, as well as to India.

Simultaneously, we are presently experiencing a “nearshoring” tendency in Europe as well. Depending on the nature of the goods, this benefits markets in North Africa, Turkey, or Eastern Europe. For instance, an increasing number of Western European companies have meanwhile brought their production of upstream products back home to the main plant, in order to fill empty capacity there and avoid having to cut staff at expensive costs by paying compensations. We can basically confirm this geographical industrial shift, but it is not as abrupt as one might expect.

The overlying development we see is that industry no longer relies on a single supplier principle but turns to a multi-faceted policy to secure procurement particularly when it comes to system critical parts. However, bringing production back to Europe leads to higher complexity in procurement and includes certain cost disadvantages. On the positive side, it reduces supply chain and procurement risks.

CFG: Are there similar relocation trends among Austrian SMEs as well?
SF: Yes, the above includes both German and Austrian SMEs, but also applies to larger global companies.
The roller coaster development and supply chain distortions during the last two and a half years have particularly hit the automotive industry but the high-tech sector as well. Simultaneously, the pharmaceutical industry and their top managers also experienced a hard landing, realizing that in Europe basic materials are not produced any longer – due to environmental reasons and high costs. The retail sector can live with the fact if only one percent of ordered products cannot be delivered in time. But what about a car manufacturer who simply does not receive urgently needed microchips? Then production lines come to a halt – and that really costs an enormous amount of money!

CFG: Assuming DZ Bank’s analysis anticipates reality: How prepared is cargo-partner for this (new) trend?
SF: From our point of view, "nearshoring" leads to a redefinition of industrial production between the Asian and Eastern European market. We are well prepared since we run stations all across Eastern Europe from Poland in the north to Bulgaria in the south, including Turkey. Having said this, we are very dynamically expanding our road feeder operations including our warehousing and distribution solutions offered to customers in Eastern Europe. In the industrial sector, we expect an increase in demand for groupage services and tailored solutions for time-sensitive shipments.
Many customers who decide to engage in partial "nearshoring" appreciate being able to join forces with one and the same freight forwarder or a very limited number of logistics service providers in such a way that they can reschedule supply chains and transports at short notice. They increasingly intend to streamline their procurements through a single network or a very limited number of delivery services. We have built up this service over 40 years, so cargo-partner is very well equipped to meet these challenges.

CFG: Thank you for your time and the insights.