The Supply Chain crisis in Europe
The International Monetary Fund (IMF) remarks that supply problems caused by factory closures and component shortages could continue in Europe in 2022 and next year. Experts estimate contingency caused by supply issues will cost the Eurozone economies up to 2% growth in 2021, equivalent to a year of development before the pandemic.
Some economists claim that manufacturing output in the Eurozone could also have been 6% higher during the fall of 2021 if not for supply problems; even then, economists expected those bottlenecks to dissipate by 2022.
According to calculations by IMF specialists, in countries with large automotive sectors, such as Germany and the Czech Republic, manufacturing output could have been 14% higher than last year. Leaders consider that constraints and strong demand played a critical role in raising production prices in the Euro area.
The institution points out that labour shortages and ageing Logistics infrastructure could have more lasting effects on supply and inflation than factory closures. The IMF recommends addressing bottlenecks directly, for example, accelerating licensing of transport and logistics workers, temporarily easing restrictions on port opening hours and speeding up customs inspections. Finally, the Fund calls for relaxing immigration rules to alleviate labour shortages.
Logistics is highly developed in the leading countries of the European Union (Denmark, Sweden, Netherlands, the United Kingdom, Finland, Germany, France, Luxemburg, and Ireland). Logistics will have significant developments in countries such as Spain and Italy in the next five years. Currently, the logistics and transport sector represents 12% of European GDP, and expect an annual spending increase in these sectors of 4%, above the inflation forecast in the Eurozone.
The development of the European market put challenges for Logistics forwards but at the same time generates new opportunities. Large multinationals in Europe are carrying out innovative Logistics practices. Their ultimate goal is to reduce distribution and manufacturing costs in a scenario in which shipments become more frequent due to market demands.
On the other hand, customers become stricter when demanding quality service. It is why large European companies are taking measures to optimise their logistics processes, such as the outsourcing of several production and distribution stages: the development of information technologies to manage the Logistics chain, the implementation of distribution centres to improve logistics operations, the specialisation of production centres, and more.
Likewise, European administrations are promoting actions to improve the distribution systems of goods. We can summarise the measures taken as the reconfiguration of macro-regional areas, the final driving force for creating the single economic site, and the enhancement of multimodal transport, significantly improving rail and maritime means.
Of the activities associated with Logistics provided by a company operator, the most valued external services to contract are the distribution of goods, long-distance transportation, and storage. These logistics activities involve several areas of business activity: infrastructure, warehouses, means of transportation, processes, organisation methods, information systems, computing capacity, computational infrastructure, and more.
The guidelines of outsourcing and specialisation govern the current European industrial context. Large multinational companies specialise their dynamic companies in employing productive typology and managing a distribution from a single centre or outsourcing distribution operations to a logistics operator.
The fundamental objective of a Logistics chain is to discover how to cut down costs and reduce its volume. In the Supply Chain, goods undergo a series of physical operations and complimentary services (before, during and after their transformation process); procedures that, in turn, involve methods of processing and transmission of information.
With the development of Logistics and the trend towards transport and complementary activities outsourcing, the usual roles in the Logistics chain are changing substantially. The Logistics activity subcontracted, or "outsourced", is one of the most effective methods when reducing costs that ensures the competitiveness and survival of many companies in the long term, allowing the transformation of the company's fixed costs into variable expenses and thus freeing up resources for other functions.
On the other hand, businesses should consider some problems concerning the Logistics chain; the supply of raw materials and energy due to the current war in Eastern Europe.
The barrel of oil is estimated to reach historical heights, affecting the global oil market with even a more remarkable escalating price of petrol. It would directly affect the international transport of goods, especially by road, increasing the costs of global trade operations.
Given the events unfolding, we can predict that world trade will experience more expensive commercial operations due to the expected increases in prices. For example, leaders estimate that Russia will have to find a way out of various energies (gas, oil) and cereals exports, concentrating them around non-allied countries, critically unbalancing its trading processes during the conflict and beyond.
How are you tackling supply bottlenecks in your company?
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