Logistics is the largest economic sector in Germany after the automotive industry and the retail business. Managing the in and out flow of goods and information, transporting goods and storing them, are important economic functions that create high value. As Germany continues to be the largest European export nation, logistics play an important role in the economy and impacts the business of many companies. This article takes a closer look at the industry, its structure, current challenges like the impact of Covid-19 as well as innovative new concepts presented by German start-ups.
The logistic industry at a glance
According to Statista, in 2019, around €279 billion in sales were generated across the German logistic sector. As Germany is the third largest exporting nation in the world and the third largest importer of goods, the logistics sector significantly contributes to the German economy.
Over 60.000 companies from the logistics sector transport goods by ship, plane, train and truck. The industry consists of diverse subsegments such as waterway transport, air freight, mail business, contract logistics and national as well as cross-border freight transport. Companies from these categories work in a network of industrial and consumer goods distribution to retailers and end-users employing more than 1.34 million people in their businesses.
According to a logistics report by JLL real estate, the e-commerce sector is growing by double digits, which requires investment in warehousing. Overall, in 2018, warehouses from all industries took over 7.2 million sqm in Germany. In the online retail segment, global players like Amazon continue to invest in expanding their logistic centers as the demand for delivery services to end-consumers keeps rising.
The logistics sector not only stands for the movement of goods by service providers but also includes the planning, control and implementation of logistics processes within companies. This means intelligent organisation and control to guarantee an optimal supply of all necessary goods and materials.
Challenges
In the past years the logistics industry continued to face challenges as a result of globalisation, new production concepts, cost pressure from the consumers, the digitisation of processes, and the growth of e-commerce. Moreover, the sector has to innovate to meet the demands of politicians and customers, particularly with regards to reducing the environmental impact of freight transports. The industry struggles to balance the growing demand for logistics with environmental, climate and resource protection. One solution is the use of alternative and sustainable driving technologies for logistic vehicles that companies continue to invest in.
Another challenge is the investment necessary to upkeep the infrastructure of the logistic industry. Therefore, the German government together with the Deutsche Bahn have decided to invest a record sum of €86 billion in tracks, trains and railroad stations repairs over the span of ten years.
International Trade
Germany’s central geographic location in the heart of Europe and highly qualified logistics services offer optimal conditions for foreign shippers to successfully enter European markets. Germany offers convenient access to the EU’s 500 million consumers. A skilled workforce is further attractive for international companies looking to invest into the German logistics industry or consider establishing a local branch.
Around 70% of Germany’s foreign trade and the associated goods and freight traffic is conducted within Europe. The most important European trading partners are France with imports and exports worth €170 billion and the Netherlands with €167 billion. The largest destination for logistics outside of Europe is Asia followed by America.
Covid-19 Impact
With the Covid-19 pandemic affecting practically every sector of the economy, the logistic industry suffered accordingly as shops were forced to shut down temporarily. The retail industry is one of the largest users of supply chain and logistics services. Overall, freight traffic on rail and road has decreased 20% since March 2020.
On the other hand, the demand for medicine and food delivery services for example was up by more than 50% in March. Overall, according to Deutsche Post, 2020 has seen a peak in online-orders resulting in deliveries of around 8 million parcels and packages per day in Germany. In the previous years, an average of 5.2 million parcels was normally delivered per day.
Following the Covid-19 outbreak, the demands of the healthcare sector challenged the logistic industry. According to Germany Trade and Invest, the supply chain with medical equipment to hospitals increased by 400% since March 2020.
Furthermore, masks, disinfectants and other related goods were transported to pharmacies and supermarkets across the country. This rise in demand for medical goods in every German state will continue in 2021 as the country enters the vaccination stage.
Innovation and Start-ups
In the past years, a large number of start-ups with innovative solutions have made an impression on the main players of the logistic sector. One example is Warehousing1 from Berlin, founded in 2018. This young company is rethinking warehouse and distribution networks by offering a cloud-based platform to find warehouses anywhere, digitally manage them, and thereby optimise processes in a cost-efficient and flexible manner.
In German cities such as Hamburg, which is known for its dominance in the logistics industry, the support for start-ups is evident through initiatives such as the Digital Hub for logistics that brings industry players together with investors, students, research facilities and start-ups. Additionally, the Hub offers co-working spaces and events. Their network has promoted more than 80 start-ups rethinking the future of logistics by using technology.
Industry Networks and Contacts
- Logistics Alliance Germany enabling German and foreign logistics companies and associations to network and cooperate. The Alliance was founded by the Federal Ministry of Transport and Digital Infrastructure with the German logistics industry.
- Association for Supply Chain Management, Procurement and Logistics (BME), was founded in 1954, and brings together almost 10.000 industry members for knowledge exchange, training, expert panels and international initiatives.
- German Logistics Association (BVL), was founded in 1978 in Bremen. The industry network consists of regional chapters, publishes industry reports, offers networking events and supports young professionals in the logistics industry.
Centurion Plus
Constantly evolving and innovating to meet the demands of consumers and business partners, the logistic sector is thriving and Germany offers a unique environment for new and existing companies to grow. Are you interested in investing in the logistics industry or considering establishing your supply chain company in Germany?
Are you looking for legal advice regarding transporting goods into European countries and the corresponding taxes? Do you need support for your legal department experienced in the logistics sectors?
Contact Centurion Plus Germany today for an initial consultation to find out about our legal solutions for the logistics industry.
