Trade Globalisation or Investment Regionalisation? The impact on European seaports Buck Consultants International ESPO Conference P.O. Box 1456 Rotterdam, May 2018 6501 BL Nijmegen The Netherlands P: +31 24 379 0222 René Buck M: +31 65 337 2612 CEO F: +31 24 379 0120 Buck Consultants International E: rene.buck@bciglobal.com
Challenges for Companies Companies have to address internal and external challenges Internal challenges External challenges • • New competitors/ technologies/ Growth of business business models • Search for talent • Market shifts • Continuous innovation / R&D • Geopolitical developments • New production technologies • Shifts in risks • • New organizational thinking Shifts in attractiveness of labor pools • Bottom Line • Regulatory challenges Buck Consultants International, 2018 1
Geopolitical developments have impact Potential risks to global economic growth over next 12 months % of respondents, n = 1,742 50 Geopolitical instability 44 Transitions of political leadership 42 Changes in trade policy 26 Slowdown in global trade 24 Slowdown in China's economic activity 20 Exit of 1 or more countries from the eurozone 14 Social unrest 14 Asset bubbles 13 Rising interest rates 11 Increased economic volatility 7 Volatile exhange rates 5 Volatile commodity prices 5 Inflation Source: McKinsey, 2017 Buck Consultants International, 2018 2
What long-term trends could affect your business the most? % of respondents Long-term trends with biggest potential effect on companies’ business over next 10 years 62 Cumulative effects of technological innovation 33 New economic, social and/or regulatory policies 30 Technological and geopolitical risks 25 Shifting boundaries between industry sectors 19 Changing pace of globalization and world trade 19 Increasing consumer-to-business interactivity 17 New sources of emerging-markets growth 15 Developments in energy and resource management 13 Income inequality and shifting labor-market dynamics 0 10 20 30 40 50 60 70 Respondents in developed economies, n=906 Source: McKinsey, 2017 Buck Consultants International, 2018 3
Different views on free trade National Economism / Multilateral Trade Mercantilism Liberalization Objective is to obtain a Objective is to obtain an ‘ favourable ’ balance of trade, by effective balance of trade, by which the value of one country’s which inhabitants and exports exceeds the value of a companies benefit from open country’s imports markets and tariff-free trading ⚫ ⚫ tariffs efficiency based pricing ⚫ develop potential of countries lagging ⚫ quotas behind ⚫ non-tariff barriers ⚫ eliminated or reduced tariffs, quotas and other trade restrictions Buck Consultants International, 2018 4
Free Trade versus Limited Free Trade Free Trade 2001 2013 2018 2023 1993 Limited Free Trade/ National Economism Buck Consultants International, 2018 5
Trade Interventions per year (anti-dumping, import tariffs, etc.) 300 Harmful Liberalising 250 200 150 100 50 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Global Trade Alert, 2018 Buck Consultants International, 2018 6
Import Duties Trade Conflicts N TTIP USA A A F Mexico T Brexit UK China Japan Europe TPP Buck Consultants International, 2018 7
Trade surplus between regions/countries In Billion USD, Goods only +346 +78 +46 +176 +153 +43 Sources: Asean.org, Eurostat, World Trade organization, USTR.gov, (2016-2017) Buck Consultants International, 2018 8
Chances on a future in which growth of seaports will be limited are on the rise Long term economic Policy shifts trends • • Asia’s cost advantages will Less public support for globalisation • shrink Growing protectionism • • Trade restrictions on the rise New production technologies • • New transport modes (Silk Routes) Multipolar growth • Reshoring of production Less interregional Less interregional trade? trade? Risk that ports will loose business Buck Consultants International, 2018 9
Responses of companies on challenges: Manufacturing Footprint Scenarios ⚫ Scenarios based on various ⚫ Examples of Scenarios • perspectives like Status Quo (benchmark) • • Global Hubs Product group allocation • • Regional Optimization Geography • • Global Product Optimization Production technology ⚫ Assessments based on • Cost • Customer • Conditions Buck Consultants International, 2018 10
Supply Chain Design Scenarios Type The actual decision what is the ‘best’ supply chain configuration operations largely depends on two factors: Function & Target group ⚫ Product e.g. value density $/m3, volume, production location, perishability of goods Type of building ⚫ Market e.g. service requirements of clients, location of customer bases, Location order pattern, demand volumes Buck Consultants International, 2018 11
Dominant distribution models per industry Dominant distribution structures EDC RDC structure NDC structure Drop ship structure • Consumer Electronics X dock – 20% for high 50% 30% value goods (phones, laptops) • Fashion & Lifestyle 80% 20% • FMCG 35% 65% • Food & Beverage 20% 80% • High Tech X dock – 20% for high 50% 30% value goods • Machinery & Equipment 20% 80% • Medical Tech 90% 10% • Pharma 60% 40% • Automotive 40% nearby supplier 60% JIT and sequencing park DC (close to OEM/tier 1) • Spare parts 75% 25% Source: BCI team analysis Buck Consultants International, 2018 12
Conclusions ⚫ more regional focused plants Risks ⚫ less growth of trade ⚫ risks of increasing trade frictions is a threat to the global economy ⚫ Ports have to face the risk of loosing to a growing Impact extent their 'license to operate' on ⚫ Ports have to rethink their position in value chains ports Strategy Shift: from transshipment centers to (production) centers of value add Buck Consultants International, 2018 13
For what kind of production/logistics activities are ports logical locations in the future? Geographical reasons Logistics reasons • • Companies with one pan-European Companies who want to be located production plant (center of gravity) near large multimodal nodes • Companies who have substantial exports because these nodes meet their to non-European markets logistic requirements Ports Place/space reasons Energy reasons • • Production and logistics companies who Production plants that need a lot of need safe and remote industrial sites due to energy, as ports are concentrations their dangerous products/production of (renewable) energy processes • Companies who benefit from large • Production plants that need large industrial waste flows estates for their manufacturing activities Buck Consultants International, 2018 14
Recommendations ⚫ Develop diverging scenario’s ⚫ Compile a robust strategy based on • which supply chains match your port best • which assets & what ecosystem do you have to offer − geography/location − logistics − place/space − energy ⚫ Develop and implement your port specific roadmap Buck Consultants International, 2018 15
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