European logistics companies are in a precarious situation. Various trends—some new and some well-established—are reshaping shippers’ logistics requirements. Their combined impact should command logistics providers’ attention because today’s traditional models won’t be able to keep pace with the changing logistics networks.

Global trends are impacting European production

Supply chain, manufacturing and consumer trends are influencing the logistics landscape. Looking to the supply chain, an increasing number of tariffs and other trade barriers are being introduced around the world. According to a World Trade Organization (WTO) report, the number of trade barriers skyrocketed from 324 in 2010, to 1,196 just six years later.1 Global supply chain risks of all kinds are near an all-time high according to the 2017 Chartered Institute of Procurement and Supply (CIPS) supply chain risk index.2

Looking at manufacturing, the dual factors of a shrinking gap in labor costs and affordable automation are leading European manufacturers to bring production back home to Europe. As salaries rise, emerging countries are continuing to lose their labor cost advantage. In parallel, automation technologies are becoming increasingly affordable. According to Accenture Strategy research, 72 percent of all manufacturing activities could be automated within the next three years.3

Looking at consumer trends, an increased focus on sustainability—driven strongly by the demands of millennials—is forcing companies to search for ways to lessen their environmental impact, for example by sourcing and producing locally. Additionally, product lifecycles continue to shorten, spurring manufacturers to develop new products and get them into customers’ hands more quickly. The distance between production and the consumer can now be a competitive factor. A European commission report found time to market was a key motivation for reshoring activities.4

These trends are fueling a major shift in the location of production back to Europe. Traditionally, products made overseas are shipped to one or two major ports for subsequent distribution via central distribution centers and full truckloads across Europe. The shift in production location is driving a more fragmented distribution structure. Multiple European production centers move products in smaller quantities across shorter distances, through regional distribution centers and “city hubs” via a fleet of new and non-traditional delivery vehicles to meet local demand. This fragmentation of logistics networks has been labeled the “Amazon Effect.”5

Trend to distributed production

 A return to local production is changing the distribution flows within Europe.

Source: Accenture Strategy, 2018

What this means for European logistics providers

European logistics providers face a big problem. Their business is built to satisfy the needs of the traditional model and is not compatible—either operationally or financially—with where their customers are heading. The shift to local production requires a new breed of logistics provider that looks and acts radically different from today’s incumbents.

This new breed will operate as a platform business, relying on “crowd-shipping” solutions to handle not only long- and short-haul business-to-business delivery, as well as last-mile delivery to consumers’ homes. It also will take advantage of advances in autonomous driving technology to reduce the need for drivers, and will employ sophisticated new technologies, including robotics, to make warehouses smarter, more efficient, and more flexible.

The logistics provider of the future

The new breed of logistics providers will need to be proficient in traditional logistics planning and execution as well as the use of technology to be successful, which provokes an intriguing discussion: Who’s best suited to become that provider?

Prototypical large technology providers with established supply chain solutions and expertise are one type. These providers have the scale and efficiency to be successful especially in the last mile business. Besides obvious large technology providers, Amazon belongs to that group as well with its global scale and sophisticated solutions for city distribution.

Another candidate is the small- or medium-size logistics technology provider. They’re obviously deep in technology and know the logistics space. But importantly, they’re also agile enough to create an effective model in which they team with and orchestrate a vast network of smaller logistics carriers, which collectively have a much higher density of warehouse and depot locations than incumbent logistics providers. This combination of strong technology expertise and the agility of a small or medium sized provider is successful especially in long- and short-haul business-to-business transportation.

This, of course, leaves the incumbent third- and fourth-party logistics providers, who arguably have the most to lose. They have the execution capabilities, the deep logistics expertise, and established relationships with shippers—but lack technology prowess and agility. They would need to reinvent themselves to become a platform business and to use technology to power their operations and execution in innovative ways. However according to a recent Accenture Strategy study, only 40 percent of organizations can understand, build and manage ecosystems; many lack experience.6

Planning for tomorrow, today

A new world truly is evolving in Europe and it will be a game changer for the continent’s logistics services providers. It could open the door to myriad disruptors with the right business model and capabilities to meet the changing needs of shippers. To avoid seeing their dominance challenged by new entrants, incumbent providers will need to make fundamental changes to their business. Given the serious implications if they don’t, it is time to start planning for reinvention today.

1 World Trade Organization, “Report on G20 trade measures”, 2016

2Charted Institute of Procurement and Supply”, May 2018

3 Accenture Strategy 2017 Future of Supply Chain Research

4 Makers, “Reshoring trends and drivers of shorter value chains”, 2018

5 Makers, “Measuring reshoring trends in the EU and US”, 2017

6 Accenture Strategy, “Ecosystems; The cornerstone of growth”, 2018.

Dr. Michael Dittrich

Managing Director – Accenture Strategy, Supply Chain, Operations and Sustainability Strategy

Christian Meissner

Consultant – Accenture Strategy, Supply Chain, Operations and Sustainability Strategy


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