Distribution Network Configurations for Containerized Import Cargo in Europe

Distribution Network Configurations for Containerized Import Cargo in Europe

Before 1993, most companies set up a distribution structure based on a network of distribution centers in major countries in which they were present. Since cross-border transactions have increased drastically after the creation of the European Internal Market in 1993 and the fall of the Iron Curtain, most companies have consolidated their national distribution centers to European distribution centers (EDC) covering all of Europe.

A few main developments characterize contemporary logistics networks in Europe. First, the evolution from an EDC to a networked EDC reduces labor requirements but demands higher skills. Second, fewer VALS are performed at the central distribution centers as these are decentralized or moved to low-cost production facilities or overseas to the source. Third, the EDC can be bypassed altogether by cross-docking, merge-in-transit, or adequate consolidation at the supplier transport hub. Fourth, a shift in location occurs caused by market dynamics (distribution follows demand) and logistics trends. This can lead to a decoupling of one EDC serving the whole European market to two or even three EDCs of similar status spread over Europe (twin or triple EDCs). Fifth, specific sectors require EDCs for their supply chain, like basic processing industries (chemicals, food, etc..), sectors with a low logistics cost (pharmaceutical, medical), and Asian SMEs with new emerging global brands from China. These trends could cause stagnation in EDC investments and growth. The fifth trend does not offset the others. Existing EDCs will be transformed into networked EDCs, reducing employment possibilities. This does not mean that investments in new specialized EDCs in ports are not possible. For the aforementioned sectors or transporters requiring sea-sea trades, these distribution centers are still required.

In several studies, European regions have been ranked based on their intrinsic qualities in view of attracting EDCs. Based on these analyses, Flanders (the Dutch-speaking part of Belgium), northern France, and the Netherlands remain the top locations for EDCs. Still, more and more regions are vying for an attractive location for RDCs and potentially EDCs. The future distribution system configuration impacts the cargo routing patterns in Europe. EU enlargement up to now has not had a huge impact on the location of EDCs in the so-called ‘blue banana’ as this zone still offers the best access to the EU’s core markets and infrastructure. However, road congestion, increasing labor costs, and land scarcity may encourage companies to search for alternative distribution structures. The Brexit pushes the center of gravity for European distribution somewhat to the (south)east. High potential candidates for RDC location are northern Germany and Finland for northern access, Hungary and Austria for central access, northern Italy and the north Adriatic region for southern access, and the Czech Republic and Poland for eastern access.

Land and maritime corridors might prove crucial to further developing efficient European distribution network configurations. However, efficient long-distance corridors can also have a downside to well-established EDC regions such as the Netherlands and Belgium: they make it easier for logistics service providers to move distribution facilities inland closer to the customer base without sacrificing good accessibility to the maritime gateways.