European Logistics & Distribution
Overview

In international commerce, everything revolves around logistics.  Commerce without logistics is like a computer without a processor.  If the underlying components don't function optimally, you cannot oversee the problems.  Pilot Freight Services in Amsterdam is specialized in International Forwarding, Logistics Services and European Distribution.  We are especially strong in the sensitive high-tech sector.  We consider personal advice to be of prime importance and that is why we always think in terms of solutions with added value.  That means you can concentrate on your core business.

The removal of barriers to the cross-border movement of goods within the expanding European single market, together with the growing interest in integrating the supply chain on a global scale are the prime drivers for re-engineering European logistics.

Manufacturers respond to globalization and the need to regain focus on core activities by re-engineering their worldwide production and logistics systems, the ultimate aim being to reduce operational costs, increase flexibility and increase the level of customer service.  This results in fewer, but more specialized, rationalized and flexible plants.

On the logistics side, stimulated by the increasing harmonization and deregulation within the European Union, this also results in the dominant trend towards centralization of European warehousing, distribution and logistics management.

Centralization of European distribution is a logical step in the development of many American and Asian companies, not only for multinationals re-engineering their total European manufacturing and logistics structure, but also for small and medium-sized enterprises (SMEs) setting up their first stock points in the European market

Centralization of European distribution brings many logistics and other advantages to the companies involved, ranging from cost reduction, increased stock turns, increased customer service, and better control of personnel reduction and asset stripping (see figure below).

Courtesy of: BCI / HIDC 1997

The Netherlands is still the market leader as a location for European distribution centers of American and Asian companies.

In this study we identified an estimated total of 955 EDCs in Europe, of which 535 (56%) are located in the Netherlands.  By country of origin, these figures are as follows:

Outsourcing European logistics to specialized logistics service providers has in recent years become very popular with both American and Asian companies.  2 out of every 3 American EDCs, 3 out of every 5 Japanese EDCs, and almost all Taiwanese and Korean EDCs are outsourced to logistics service providers.  This means that only 30-40% of American and Japanese manufacturers with their own stocks in the European market operate their EDCs themselves.

Since 1990, the number of outsourced American and Asian EDCs has grown rapidly compared to the number of self-operated EDCs.  Most Korean and Taiwanese EDCs currently in Europe have been established within the last five years.

• Central geographical position of the Netherlands in Europe:  The gateway to Europe for incoming shipments, located close to the main European markets
• Tradition of trade and transportation
• Flexible legislation and the businesslike attitude of customs and tax authorities
• Quality of the infrastructure and the main ports (sea and air)
• Positive and flexible attitude of the workforce
• Multilingual workforce
• Cooperative government (national, regional and local)
• Quality and logistics expertise of the logistics and transportation industry

Advantages of Third-Party Logistics

No capital investments needed - Less risks

By using a third-party logistics service provider like Aramex, Pilot Freight Services' partner in The Netherlands, the manufacturer does not have to invest in land, buildings, handling equipment, hiring and training of logistics personnel, etc.  Therefore, the manufacturer avoids the risk of disinvestments in case of major changes in the market situation.

Lower total logistics costs

The total logistics costs will be lower when a manufacturer uses a third party.  Aramex will be able to neutralize problems with warehouse utilization (e.g.several clients with different seasonal patterns may compensate each others' fluctuations), which results in a more constant work flow and thus lower costs.

Flexibility in space and manpower

Instead of a high level of fixed costs, the manufacturer's logistics costs will vary with the volume of sales.  And, the manufacturer does not have to hire and train personnel and maybe more importantly does not have to fire people when business slows down or when trying to reduce the logistics costs.  Incidental peaks can easily be dealt with:  Aramex will solve this problem on behalf of the manufacturer.

Economies of scale

By using a specialized logistics service provider like Aramex, the manufacturer is able to profit from economies of scale which such a company is able to realize.  By serving several clients, Aramex is able to invest in certain equipment, specialized personnel or information systems which the manufacturer never could have done on his own.

Insight into logistics costs

A lot of manufacturers do not have a total insight into their logistics costs.  By using Aramex the manufacturer has a weekly or monthly overview of his costs.  This has several advantages for future planning, cost-control programs, etc.

Concentrate on your core business

By using Aramex, the manufacturer gets rid of a lot of time- and money-consuming activities which he can use for his core business activities in the European market, e.g. marketing and sales.

Value Added Logistics

As a 'Value Added Gateway' to Europe, the Netherlands, and therefore Aramex, have great potential for assisting American and Asian companies to strengthen their position in the European market by means of Value Added Logistics (VAL).  Within the Netherlands, VAL is implemented in one out of every three EDCs.

The most widely performed value added activities are:

• Quality control and testing of products
• Countrylizing and customizing
• Assembly
• Repair
• Reverse logistics

The main reasons for adding value in EDCs are:

• Maximizing flexibility
• Improving product availability
• Reducing delivery times
• Reducing total logistics costs, especially costs of stocks, transportation and import duties.