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Transport and Logistics
The slowdown of the global economy and the disruption of supply chains is causing economic challenges unthinkable a short time ago. Germany’s logistics sector shows its flexibility.
Apr 20, 2020
Especially hard hit by the corona crisis is the airline industry. In a move similar to that of other European airlines, the Lufthansa Group has cut its capacity by more than 90 percent and parked around 700 of its 760 plus fleet. Yet despite the current almost non-existent demand for air travel, the airline’s cargo division is flourishing and further expanding its airfreight capacity between Europe and Asia by adding over 50 flights to and from China.
On the ground, the situation is not so drastic. Nonetheless, according to the German Federal Ministry of Transport, freight traffic on German rail and road has fallen by almost 20 percent since the order to restrict social contact and close non-essential business operations in Germany came into effect on March 16.
The majority of online retailers are also suffering from the effects of Covid-19. E-commerce sales were almost 20 percent below the previous year's level in March according to the Federal Association of E-Commerce and Mail Order Business (BEVH). Most notably, March saw a drastic slump in online retail sales of books, electronic & telecommunication goods and clothing - down 14 percent, 21 percent and 35 percent respectively. In contrast, online demand in March for medicines boomed (88 percent increase); as did food orders (55 percent plus increase) and drugstore goods (almost 30 percent increase).
According to Deutsche Post, an average of 5.2 million parcels are normally delivered daily. Deutsche Post currently transports more than eight million parcels and packages per day – a volume similar to the pre-Christmas period. Because of the current high volume, Deutsche Post has proposed a temporary introduction of operations on Sundays.
Considering this surge, it’s not surprising that the corona crisis is also causing an increased demand for storage space in Germany. "For very high-demand products such as food or sanitary items, there is currently a very strong demand for additional space in the vicinity of production facilities or distribution centers with short term rentals of up to one year," according to Frank Weber, Head of Industrial Agency JLL Germany. With the market favoring flexibility from all sides, owners do not want to remodel or modify existing rentals for the short term. “What matters most at the moment is speed,” states Weber. A current DVZ survey in the logistics real estate sector confirms this assessment, noting that food retailers and the medical sector in particular are desperately looking for storage space in the corona crisis for three to six months.
The corona crisis is driving demand for flexibility and speed. This is most apparent in Germany’s healthcare and emergency logistics sector where great quantities of goods are currently required. Supply chains to hospitals reported growth rates of up to 400 percent in supplies of protective masks, suits, disinfectants, and other medical equipment. German company Fiege, one of the market leaders in healthcare logistics, operates a dedicated emergency logistics concept in close contact with the Federal Ministry of Health. The goal is to keep critical goods in stock at various locations in order to always be able to deliver. Fiege has just launched a digital platform (Flexfillment) in order to optimize supply chains during the corona crisis. The platform aims to bring together companies with an urgent need for warehouse critical goods with logistics providers who can provide free space at short notice.
However, Fiege is not alone on the digital field. Germany’s logistics landscape is seeing a number of digital platforms optimizing supply chains during the Corona pandemic. Start-ups could in fact emerge from the crisis having benefited. The Berlin logistics start-up Warehousing1, for example, has reported strong growth. It offers a central channel for identifying storage space and logistics services at numerous locations and manages them digitally with optimized efficiency.
Other examples show how Germany’s digital hubs are coming together during the crisis. With Covid-19, last-mile logistics are reaching their limits. The company Frischepost gained help from the Digital Hub Logistics Hamburg – one of many digital hubs in Germany – to find additional drivers and delivery vehicles needed to cover the growing consumer demand. Another company, ANGEL Last Mile, is also developing new delivery processes and is currently cooperating with local pharmacies and supplying the necessary medication, particularly for older, at-risk households.