Near shoring, re-shoring or continue with globalization as done before? At the recent TIACA-held air cargo forum Miami and transport logistic Americas 08-10NOV, this was a recurring topic. Now, the Frankfurt-based DZ Bank has published a survey in which the future investment policy and supply chain strategies of SMEs are put under the microscope against the backdrop of various overlapping global crises. The main findings are presented here.
Old views and habits are no longer valid. An increasing number of managers realizes that globalization has passed its zenith and that something needs to change in the international production and supply chain strategies practiced by their companies. A broad survey conducted by Frankfurt-based DZ Bank underscores this trend. All findings are based on information provided by owners or managing directors of 1,000 medium-sized companies. The most important result: Many MSEs want to concentrate their economic activities more on European soil again. Above all, companies are again increasingly purchasing their preliminary products within Europe in order to protect themselves against material bottlenecks. This is likely to have a significant impact on supply chains, where regional transportation is likely to become more of an issue.
In a nutshell: doing business in safe havens becomes a new priority. According to the study one in three medium-sized German companies intends to concentrate its business more on European soil again in the next 5 years - partly because of the stable supply chains running there. Every fifth player (21%) prefers to focus primarily on Eastern and Central Europe, i. e. countries such as the Czech Republic, Poland and Slovakia. "There is a clear trend to produce where the products will later be used," DZ Bank corporate customer board member Uwe Berghaus told press agencies.
Interview with Stephan Haltmayer, CEO Quick Cargo Service
CFG: Stephan, is this homecoming strategy of European SMEs already noticeable in the daily logistics business of QCS?
SH: Indeed, according to our observations, a growing number of companies reorient their business by engaging increasingly in Europe again, particularly in Eastern Europe. There, labor and production costs are comparatively lower than in Central or Western Europe. Incidentally, we have already anticipated this development by establishing branches in Romania, Poland, Hungary, and Slovakia at the beginning of this year.
CFG: By contrast, we see skyrocketing energy costs above all by Russia's war against Ukraine.
SH: That's true, but supply chains are more secure, and the environmental footprint is smaller compared to long-distance freight transport. And greenhouse gas emissions tend to become increasingly expensive. In turn, those who operate sustainably enjoy cost advantages at the end of the day.
CFG: In the USA, one slogan is "Buy American”. Do Europeans need a "Buy European"?
SH: Yes, I think so. We also need to protect our markets, but wisely and without discriminating against other countries. That also means, as the pandemic has shown, that we should produce certain goods here again, such as hygiene products, medicines, tablets. They mostly come from China or India, which makes Europe extremely dependent on these countries and their policies in critical times.
According to the survey, the shortage of microchips in line with container congestion in ports, which lead to unpredictable transit times of shipments is bemoaned by many traders.
Simultaneously and fueled by Russia's invasion of Ukraine, a growing public and political debate about how to deal with China has erupted. German Economics Minister Robert Habeck, for example, has warned against one-sided dependencies and called on companies to adopt a broader approach in the Far East, i. e. to give preference to other markets. He has also announced that the government will no longer approve state security guarantees for investments in China, which significantly increases the financial risk for companies.
According to the DZ Bank study, almost one in six medium-sized companies is now considering turning away from "outsourcing". Instead, core activities and services are to remain within the company or be brought back in-house. “The times they are a-changing.”
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