Logistics moves the entire economy

Economic developments in recent years have led to the creation of complex company networks and systems of goods flow - in the process, the globalization of procurement, production and sales as well as the division of labor have increased. In addition, the complexity of international logistics systems in many sectors has grown as a result of increasing product variations and differentiation. Another factor is that many companies are concentrating on their core skills and are reducing their vertical integration. The efficient management of the resulting global flows of goods has boosted both the business and economic significance of logistics.

Germany’s logistics market plays a leading role

The microeconomic significance of logistics can be clearly shown by the logistics market in Germany. Driven in particular by the European Union’s eastern enlargement, logistics has steadily grown in recent years, particularly in Germany. Furthermore, Germany is Europe’s largest sales market with 82 million consumers.
Among business sectors, the logistics market in Germany ranks third, behind the automotive industry and health care. In 2006, revenue totaled €170 billion. A total of 2.5 million people were employed by logistics service providers as well as industrial and trade companies. The traditional logistics sectors of transport, storage and transshipping generated the largest share of overall logistics revenue.
In addition to logistics service providers and the internal logistics operations of industrial and trade companies, the macroeconomic impact of logistics extends to the logistics supplier sector. Supply products include vehicle, conveyor and warehouse technology, IT systems, property, operating materials, fuel and related services. Together with these supplier products, the macroeconomic impact of logistics totals €240 billion and 3 million employees. If logistics-dependent employment in other business areas, e.g., in transport infrastructure and construction, is considered, an additional 1.6 million are added to the total [1].

The close relationship between economic growth and logistics

Mobility is a critical condition for gains to be achieved in productivity, growth and employment in a macroeconomic context. The connection between economic growth and demand for product-transporting services is the result of various effects. These effects can clearly show the growing significance of the economic sector of goods distribution [2]:

 

The effect of goods volume

For a long time, it was assumed that in highly developed economies fewer and fewer quantities of goods were produced for the macrologistics system and that the transport volume rose at a slower pace than the economy.
Today, it can be assumed that the development actually goes in the opposite direction as a result of the increasing inter-company division of labor created by intensified outsourcing in some highly developed countries. Transport intensity - that is, transport performance per production quantity unit - increases for many types of goods. Individual parts or components of a product are transported numerous times during various stages of the value chain, e.g., transports between plants [3].

 

The effect of goods structure

In highly developed economies, the number of high-quality consumer and production goods rises. The share of mass goods, on the other hand, stagnates or even falls. The distribution of goods then shifts to high-quality products that must be shipped quickly.
Because of the relatively low costs, road transports Road transport generally benefit. Railroads and inland water transports generally suffer because of their low speed [3].

 

The effect of logistics

Logistics systems constantly undergo optimization. Supply chain management Supply chain management , production-synchronization deliveries that employ just-in-time Just-in-time concepts, the forgoing of storage and global outsourcing are just a few examples of this. But the application of modern logistics concepts affects the economic sector of goods distribution.
This is because the new logistics focus of industrial and trade companies has altered the demands placed on the goods-distribution system. Road transports can react relatively flexibly and well to these demands. Railroads and inland water transports have a difficult time making this switch. At the same time, air-freight transports profit from time-critical shipments [3].

 

The effect of integration

The creation of large economic regions gives rise to international, cross-border logistics systems. For instance, the European Union and regulations from the World Trade Organization [World Trade Organization (WTO)] have propelled globalization Globalization in the goods-distribution sector.
As economic regions spread, cross-border trade expands and the distances that must be covered by logistics systems lengthen.
The effect of integration describes the increasing demands placed on the economic sector of goods distribution that are arising from the creation of larger economic regions and cross-border logistics systems [3].

Recommended reading

Top 100 in European Transport and Logistics Services | Klaus / Kille 2007

Logistiksysteme | Pfohl 2004

Fundamentals of Logistics Management | Grant / Lambert / Stock / Ellram 2005

References

[1] Top 100 der Logistik | Klaus / Kille 2006
[2] Logistiksysteme | Pfohl 2004
[3] Transportwirtschaft | Aberle 2002

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