In recent times it seems that the trend towards out-sourcing or re-locating production to remote, low cost centres of manufacturing has been inexorable. Systemic change in production patterns has resulted in several waves of migration over the last three decades.

The first involved multi-nationals re-locating to the least economically developed members of the EU (for instance, Spain, Portugal and Ireland) aided by large subsidies or tax breaks from national governments. As these economies grew, living standards and GDP per head increased, and this resulted in rising labour costs forcing manufacturers to look for a region with a lower cost base. Such a region was to be found in fast developing Central & Eastern Europe and this prompted a second wave of re-location facilitated by increasing integration of these countries with the EU.

Long before full membership of the EU was achieved in May, money had flowed into the region to help with reconstruction and development in the post-communist era. Transport infrastructure was improved which allowed multi-nationals to supply western European markets, especially Germany, from the region. The removal of customs barriers following accession has made it even more attractive to foreign companies.

However, even when this region was at an early stage of development, companies in some industries were looking further afield for lower cost production sites. Where transport costs are not a major factor in the total value of a product (e.g. high tech goods), re-location to developing markets in the Asia Pacific Rim region is a real option. China, Indonesia and even Vietnam are some of the most popular destinations.Whether to Central & Eastern Europe or Asia Pacific, the migration of production has had a profound effect on the logistics industry. Local and national carriers have lost out to the major logistics companies which were able to provide regional or global services. At present the major freight forwarders and integrators have been the main beneficiaries.

Although this trend has been well documented, there is growing evidence that things may be about to change. The motivation behind out-sourcing production to remote, low cost regions has come from companies? need to stay competitive. National and European initiatives over the last decade, including the 35-hour week, minimum holiday entitlement, works councils and other measures which have made labour markets inflexible have forced companies to look elsewhere. Governments, unions and other employee organizations are starting to realize that in order to save jobs, it is necessary to create a more competitive labour market within Europe itself.

Source: Transport Intelligence

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