Central & Eastern Europe

Central & Eastern Europe continues to enjoy strong investor interest and inward foreign direct investment flows. Poland enjoyed was the highest gainer globally in the World Bank’s 2013 Doing Business report. FDI in Central Europe in particular generated more new jobs than it did in Western Europe.

The region continues to invest in transport infrastructure, with both EU and private funding providing the impetus for development of road networks (the A2 and A4 east-west motorway corridors in Poland) and port facilities (Constanta and Gdynia). Rail continues to lag behind road in terms of shipper preferences, however there are recent signs of a reliable and competitive China-Europe rail corridor providing an alternative to sea freight. Private rail operators increasingly compete successfully against road freight, in particular for heavier goods and less time-sensitive supply chains such as ceramic tiles and white goods.

Manufacturing companies relocating to Central European markets already within the EU are well-served by both multinational and local third-party logistics providers (3PLs), and there is good stock of modern warehousing space. There continues to be a significant cost advantage to relocation, with blue-collar labour costing 50-75% less than in Western Europe, and industrial space costing 30-50% less to rent.

Selected factors affecting shippers’ supply chain decisions in Central Europe:

  • Relatively high dynamics of skilled labour availability: continued inward investment can quickly change a previously attractive location into a challenging labour market. Investors should consider whether the vicinity of a major metropolis is necessarily the best choice to site their facility
  • Lower maturity of supply chain thinking: logistics outsourcing decisions should still be taken with care. While warehouses in more mature Central European markets typically operate at similar or higher quality KPIs than in mature markets, even global 3PLs may not always offer the same level of maturity and partnership in their relations with shippers as in developed markets. Global brand is not necessarily an indicator of local execution capability
  • Fragmented road transport market: 90% of road transport companies registered in Poland have less than ten vehicles. Shippers are faced with the decision either to source their road transport directly from multiple suppliers, increasing organisational complexity, or to contract with a freight forwarder who will typically add a margin of 8-10% for their services
  • Flexibility for seasonal demand: many industry sectors experience significant demand peaks due to weather, public holidays and aggressive promotional activity by retailers. Manufacturers should ensure they and their 3PLs have appropriate resource plans in place to ensure sufficient storage, throughput and shipment capacity is available in times of peak demand

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