How they add value to a Region
With a market volume of around 253 billion euros, the logistics sector is an important and ever growing part of the German economy, with turnover almost doubling in the last 20 years alone.
This is one particular reason why logistics premises are highly sought-after up and down the Country. It is also demonstrated by the consistently high volume of new-build sites, accounting for around 3.5 million square meters in 2015. The drivers of this growth are the automotive and e-commerce sectors, which are responsible for a large proportion of the new-build sites. In view of the forecast growth figures, there is an assumption that this trend will only increase further over the coming years, particularly for online retailers both big and small. The more goods that are ordered online, the greater the need for efficient storage space.
A growing number of retailers are choosing not to store and pick their own goods, preferring to outsource their fulfillment tasks to external service providers with their state-of-the-art distribution centers.
Yet the boom also has its dark side, because it is leading to a shortage of available space and – especially in metropolitan areas – causing bottlenecks. As a result, logistics firms must ever more frequently compete with other sectors (such as manufacturing companies) for the scarce space. Opponents of the new storage sites and distribution centers generally like to claim that these businesses are not only responsible for a high level of soil sealing, but also much heavier traffic congestion. They also say that the jobs created are mostly for low-skilled workers. In other words, the construction of such sites is neither particularly beneficial to the state nor the population. This is a very general statement, which loses much of its substance when examined in greater detail. The growth shows that local communities, citizens, and other businesses benefit in a number of ways when a new logistics firm moves into the area.
Jobs, tax revenues, and economic power – the benefits for local communities
Many different jobs are created when a new company moves in, not least for those responsible for the storage and handling of the goods within the logistics center. There are also the jobs that are
created for those who transport and deliver the goods as well as administrative and management positions at the site. Around a fifth of the people employed in the logistics center have a commercial or administrative job, contradicting the commonly held view that it is mostly low-paid jobs that are created when a company moves into the area. And there will be an even more positive impact on employment in future, because there is a trend toward ever greater specialization and expert knowledge among those who work in the logistics sector. The low-skilled warehouse worker’s job is not yet an obsolete model, but with the pace of technological development and the continuing trend toward automation, the range of skills needed to work in the logistics sector is constantly growing.
Furthermore, it creates a need for service companies that supply the logistics firm or are connected to it in some other way. Trucking companies, for example, or warehouse management firms prefer to locate their businesses close to such facilities. As a result of a new logistics project, a location is occasionally also of interest to completely different companies that wish to take advantage of the infrastructure created by the new build. The economic power and attractiveness of the location is thus enhanced way beyond the mere effect of the new build.
There is also the fact that the additional jobs directly support the local economy. Homes are built for and bought by the new employees, who then fill them with furniture bought from local retailers. A good part of the newly acquired purchasing power is reinvested locally, generating additional turnover for the established businesses and helping the local community to collect extra tax revenues. As such, many different companies benefit from the value added to a region when a new business moves in. A “healthy” economic structure of this kind simultaneously reduces a region’s susceptibility to crisis and secures it an attractive position as both a business location and place to live in the competition with other regions.
If a fulfillment center has been built, for example, the location is also of interest to online retailers. They always need to make sure that their goods are stored and shipped efficiently. The proximity to a suitable service provider is therefore of real interest and has influenced many a decision to move to a particular location. New, highly skilled jobs are also created in this way.
Save space by optimizing the warehouse
With their highly dense storage of a wide range of goods on a small footprint, modern logistics facilities can help to make more effective use of storage areas and save valuable space. These space-saving systems make it easier for local communities to designate new areas of land for urgently needed distribution Centers.
The modular design of automated storage lifts makes it possible to make optimal use of the available space. Whether the ceiling height is four or twenty meters, the unit is adapted to fit perfectly. Differently sized items can also be considered because the spacing between the trays can be freely selected. It is even possible to link two systems behind one another in rooms that are narrow yet deep. Nonetheless, goods can still be stored and retrieved ergonomically using one single workstation. All of this means that the capacity of a warehouse can be quadrupled with dynamic storage systems. Low energy consumption and fast storage and retrieval times combined with picking accuracy of almost one hundred percent are further factors that make the case for the efficiency and productivity of state-of-the-art Systems.
Yet with e-commerce as the main driver, completely new storage solutions must also be considered, particularly in metropolitan areas. In this regard, multistory warehouses like those we tend to have already seen in Asia and cities with dizzyingly high rent prices are most certainly one option for Germany’s big cities. Vertical logistics promises considerably greater capacity on a small footprint, which is precisely what logistics firms are looking for. It is also possible to convert empty commercial buildings and offices into storage spaces. Amazon is already experimenting with this in Berlin and Munich.
Summary: logistics pays!
In view of the positive economic impact on companies, the state, and the population outlined here, there is a great case to be made for the establishment of logistics centers. However, care must always be taken to ensure that the right location is found. Since there is expected to be continued strong demand for logistics sites (given the good growth forecasts), efficient examination of locations for new warehouses in Germany will be of critical importance. In this regard, the right framework conditions must be created for all those involved.