From Oil to CO2: Countdown to a changing distribution map

Fuel prices are soaring. Following the unrest in a number of Middle East / North African countries, a barrel of crude oil exceeded US $ 100 last week – its highest level since September 2008. Rising concerns about a setback in the global economic recovery apart, this will further accelerate strategic changes occurring in the distribution sector.

Transport costs are already a significant concern, reflected in network adjustments over the last few years. Companies are reviewing supply chain options in order to cut/optimise transport costs by reducing travel routes and empty-load kilometres as well as utilising different transport modes or carrier sizes. Such trends are highlighted by recent news concerning shipping liner Maersk ordering ten new “Tripple E” container vessels which upon completion in 2013:

  1. Will be the largest sailing container ships (400 metres long, 59 metres wide and 73 metres high)
  2. Will have a 16% higher capacity in comparison to the largest operating ships today
  3. Will produce 20% less CO2 per container compared to today’s largest container ships
  4. and 50% less than the industry average on the Europe-Asia trade lane.

Nevertheless, there will be restrictions in relation to port access: Not many European ports offer sufficient capacity in terms of depth, berth lengths, loading/unloading and container handling to accommodate the largest ship classes. Similar infrastructure restrictions will impact mega-liner lorries and larger air cargo planes. Companies will have to relocate to areas offering infrastructure able to accommodate huge carrier sizes, ultimately favouring areas with excellent infrastructure access outside congested major cities.

Furthermore warehouses will be more economically efficient to help counteract rising transport costs. Lower land prices (reducing rental levels), lower labour costs and higher incentives from local governments and municipalities have become an important decision factor when choosing the location of a warehouse and this trend will become even more accentuated in the future. As such, network optimisation, driven by the need to reduce transport costs amongst other factors (such as growing environmental pressures) will have a significant impact on a changing European warehousing landscape in the next few years.