Series Logistics: A Growing Industry in Upheaval

08/28/2019 – Thomas Weber

What challenges logistics in Germany

Recently, I was at an event with executives from the logistics industry as part of a major trade fair. The impulses, presentations and discussions showed: The logistics sector is currently experiencing a boom. It is jumping from one revenue peak to another – and new as well as more traditional players are entering the market with innovative, technology-driven business models. But the mounting success cannot hide the fact: Logistics is in a state of upheaval. The limits of the sector's capacities are becoming increasingly apparent, while the pressure for transformation is enormous. And the mills grind slowly.
Reason enough to take a closer look at the industry in the coming weeks. A first overview.

Germany leads and continues on course for growth

Over one trillion euros is the sales volume of the European logistics market. For comparison: One trillion euros, that is roughly equivalent to the total of all net salaries and wages of German employees. German logistics alone is responsible for more than a quarter of this – in 2018, the annual revenue of the German logistics market was just under 279 billion euros. And the market has grown by a remarkable 40 percent over the past ten years – an average of four percentage points a year. For the current year 2019, a two percent increase in revenue is also expected compared to the previous year.

This makes the German logistics market the lone leader, ahead of the second and third placed Great Britain (139 billion euros) and France (127.8 billion euros). The reasons for this are obvious, such as Germany's geographical location in Central Europe, the strength of the German industrial contract logistics – i.e. the delivery and provision of goods for local industrial production – and the export position of the German economy. Probably the most important growth driver is currently B2C online trade, which has grown by an average of eleven percent per year in Germany over the past five years.

Shortage of skilled workers, increasing demand and city logistics are the pain points

What challenges does German logistics face? Dachser CEO Bernhard Simon recently put it in a nutshell to the point: "If it wasn't clear yet before, the management of scarce resources in 2018 the core discipline of logistics." Above all, the shortage of skilled workes, the scarcity of cargo space and meeting demand in city centres pose considerable challenges for this growth industry.

Almost 90 percent of those surveyed in German logistics companies see the shortage of personnel as the biggest problem in the industry. There is already a shortage of personnel to fill vacant positions. It is becoming increasingly difficult to find train drivers or truckers. In addition, the age structure of today's workforces promises to exacerbate the problem considerably in the coming years. After all, the overwhelming majority of logistics companies are investing heavily in hiring IT specialists, as the level of requirements is rising dramatically due to robotics, networking and the use of data analytics.

The pressure on traditional logistics providers to further advance the automation of their processes is therefore particularly high. Otherwise, the personnel problem will exacerbate the problem of meeting demand even more. PwC says that the personnel bottleneck will only ease in the medium to long term, i.e. when fully automated warehouses or autonomous trucks become widespread. Providers like Magazino from Munich are a good start. The autonomous picking robots they have developed do not (yet) replace warehouse employees, but work in parallel with them and relieve their workload.

Cooperation through data exchange and networking instead of silo thinking

However, the industry not only urgently needs more drivers to meet demand, but also new solutions to optimally distribute existing capacities. It is almost paradoxical that loading space is becoming increasingly scarce in Germany, but at the same time it is very inefficiently distributed. In 2018, the number of freight orders exceeded the number of freight space offers by more than two thirds, which naturally caused prices to rise. But: still more than half of all truck journeys in Germany are empty. What will it take? Consistent data exchange and intelligent connectivity – both vertically and horizontally. The central task here is to develop the willingness to share data with the competition in the spirit of "coopetition". After all, the more participation, i.e. the more information on loading capacities is available, the more efficiently space can be distributed.

At present, logistics can be seen to be pushing an industry to its capacity limits. In the future, bottlenecks will no longer be limited to seasonal peaks – such as Christmas holidays, which causes the collapse of inner-city logistics every year. In 2018, DHL, DPD, Hermes and Co. shipped around three and a half billion packages – at peak times more than 18 million shipments in a single day. Hardly any other country sends more parcels – on average 24 deliveries per capita per year. Only in China has more. Figures that will only continue to rise due to the triumph of online commerce.

What it means for city centres in particular when one in ten consumer products reaches consumers via mail order is clear: traffic jams, lack of parking space and costly delivery attempts by parcel carriers. The pressure on the industry to develop solutions for the so-called "last mile" is increasing – after all half the cost of shipping occurs here. The industry is relying on a variety of solutions, ranging from the well-known parcel stations in city centres, In-Home Delivery, to delivery drones and robots. Here, we experience how individual technological solutions are refined, but not thought of in an integrated way, let alone controlled. Especially urban centres urgently need such overall concepts.