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International investment in logistics : Situation and trends in Europe
AFII 2005 International investment in logistics : Situation and trends in Europe Fabrice Hatem, Invest in France Agency, Normandy Business School Le Havre, Sept 28th 28 september 2005
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… with the result that countries are competing to host these functions
AFII 2005 The stakes are high Businesses operate using different functions, not just production, but also logistics, R&D, etc. Multinationals structure their international networks to capture the specific advantages of different host areas This strategy extends to all functions, which have thus become internationally mobile… … with the result that countries are competing to host these functions
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The source data FDI data have a limited usefulnessy : they mix up MA/greenfields, give no information on the function involved, etc. Necessity to collect new types of data : informations on individual international projects by multinationals companies Sources : international press, the web, promotion agencies, companies… Ex : Ernst and Young (EIM), IBM/PLI (Gild), AFII Each project is described by about 20 parameters One possible use : analyse the trends for a specific corporate function (e.g : R&D, logistics, Call centres, Headquarters, etc.)
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Services support functions : already a big market in Europe
AFII 2005 Services support functions : already a big market in Europe 58% of projects, 25% of jobs (2002 – 2004). Logistics : 6 % Smaller average size in terms of jobs than plant-related projects. But projects in logistics are larger than the average service project. Major structural impact on the host country Per worker skills and wages higher than in production jobs Do not confuse support or tertiary functions (such as R&D..) with tertiary sectors (such as banking..) – another area where international investment is growing
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Functions, by number of projects 2002-2004
AFII 2005 Functions, by number of projects
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Functions, by number of jobs created 2002-2004
AFII 2005 Functions, by number of jobs created
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Projects, average number of jobs, 2002-2004
AFII 2005 Projects, average number of jobs,
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Every sector of activity is affected
AFII 2005 Every sector of activity is affected Large overall proportion of service sectors (because of outsourcing, nature of activities) R&D: pharma and electronics Logistics: manufacturers, distributors (retail, whosales), service providers Call centres: importance of service sectors SSCs, HQs: broad sectoral diversity
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Reasons for the development of investments in logistics
Rising flows of products (growth in international trade, containeuraization) Management of complex production networks by multinational companies Supply the market quickiy and relayably Global re-engineering of their logistical european networks by multinational companies Extension of activities (production, sales) to new regions (Eastern Europe). Logistics follow Trend to externalization incite external services providers to open new lines and/or services and/or sites Rising content in added value and integration of services imply new needs in investment (automation of stock management, customers relation centres…)
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Various types of projects
Upstream : production-support logistics. Ex : Forward suppliers warehouse close to the factory Midstream : Optimize the collection and dispatching of products. Ex : logistic hub Downstream : access to the customer. Ex : warehouse close to the retailing point
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Organization of the supply chain: the example of the automotive sector
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Proportion of jobs created in logistics by sector, 2002-2004
AFII 2005 Proportion of jobs created in logistics by sector,
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Proportion of logistics in job creation by sector, 2002-2004
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Main logistic services providers on the European market, 2003
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European firms play a prominent role
AFII 2005 European firms play a prominent role For services-support activities as a whole (Call centres, R&D, HQ, SSC…), UK and US firms are the first investors But in logistics, European companies come first 1. German companies : large german logistic services providers ; Logistics follow the relocation of manufacturing activities in Eastern Europe 2. US : supply the west-european market, few relocations to EE 3. UK, France : large companies in distribution, logistic services providers
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Jobs created in support functions by source region, 2002-2004
AFII 2005 Jobs created in support functions by source region,
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Where do projects in logistics locate ?
Western Europ still capture 80 % of jobs creation in logistics (market access, production capabilities..) Brittanic Island and to a minor extend, Benelux countries, are still a favorite location for extra-european (US) investments France takes profit of its centrality in Western Europe (East-West and North- south flows), its good infrastructure, availability of land (vs congestion in Benelux) Growing markets in southern Europe (Spain) Relocation of manufacturing into Eastern Europe implies increased needs in logistics
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Job creation, by host country and function 2002-2004
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