he growth of the European Union and the emergence of economies in Eastern Europe are significant dictators of new logistics projects on the Continent. Distribution facilities are moving eastward and becoming more regional. Logistics providers are siting new hubs in the east, while companies are looking at Eastern Europe for new regional distribution centers.
      Movement of goods in Western Europe also figures to change in the coming years as a major canal infrastructure project in Northern France and Belgium is completed, facilitating barge cargo traffic throughout the region.
      "Overall in Europe during the last 15 years, the trend has been toward companies having a single European distribution center, but now that trend is being reversed because of the enlarged Europe, which has become too large to be handled by a single facility," says Roy Lenders, vice president of the global supply chain management practice of the Paris-based Capgemini consultancy. "Companies are developing a hybrid structure with one major distribution center and a few regional facilities. They are looking to Eastern Europe, and putting facilities in countries such as Poland and the Czech Republic."
      Logistics hubs are also moving east. DHL opened its new €300-million (US$475-million) European air hub at the Leipzig/Halle Airport in eastern Germany in May. The project brings an immediate employment boost for the region, with 2,000 jobs to start and a total of 3,500 by 2012.
      Scott Price, DHL Express CEO for Europe, says moving the hub from Brussels, where it had been for about 20 years, was a major strategic move that involved consideration of such issues as projected economic growth on the continent, labor costs and regulatory considerations. In a selection process that took about a year, Leipzig/Halle made DHL's short list with two other airports that Price declines to identify publicly, since the company maintains gateways at each.
      "When we look for growth in Europe, we see flow of kilos in Central and Eastern Europe as a greater proposition than the past 20 years, so we wanted a more eastward location," Price says.
      "In the case of Leipzig, it has traditionally not had success in attracting investment, and therefore has had high unemployment and a deep labor pool," Price says. "In the final equation, Leipzig came out more favorably."
      The hub includes a distribution center which DHL describes as having the largest and most modern sorting line in Germany, plus an aircraft hangar, apron, tank station and administration building. The amount of freight transshipped every working day is currently around 1,500 tons per night, but by 2012 this figure is set to rise to 2,000 tons.
      Price believes DHL's future growth in Europe will be product-oriented rather than country-oriented. He says a significant source of DHL's growth will come from increasing acceptance of online shopping in continental Europe.
      "The B-to-C [business-to-consumer] arena offers some interesting statistics. About five percent of retail sales in the U.S. happen online, and that has created a significant B-to-C market. In Europe, about 1.5 percent of retail sales are online with about 3.5 percent in the U.K. We see a pretty significant growth market in Europe as that trend moves eastward."       Price and Lenders both say the skyrocketing cost of fuel has the industry strategizing deep into the future.
      "At a time when oil was $80 a barrel and considered an Armageddon scenario, we never saw a downturn," Price says. "Not at $100 a barrel either. What has started to slow the growth of logistics is more of a general conservatism in consumer and business confidence. The slowdown is related more to a pessimistic demand view and therefore inventory reduction. Demand is forecast to decrease."
      Lenders says fuel costs haven't led manufacturers to change their distribution strategies – yet.
      "Most companies have outsourced their transportation in multi-year contracts," he notes, "and will only see higher costs when those contracts expire."
      Rising transportation and labor costs in the manufacturing centers in the coastal regions of China also have manufacturers eying Eastern Europe, Lenders says.
      "There is a lot of discussion about pulling manufacturing back to Europe from China and India because container costs and fuel costs are favoring local production," Lenders says. "That trend is evident with a number of companies who are now setting up factories in Eastern Europe to move at least part of their manufacturing back. Wal-Mart buys most of its plastic products from China. Those products are made with oil, and manufacturers are experiencing huge increases in material costs. They also have increased transportation costs. Those companies are having huge difficulties, and it will be interesting to see where the new balance will be found.
      "Eighty percent of the raw material costs are related to oil, so production might even go to the Middle East to be close to oil production," Lenders continues. "All of the logistics service providers I know of are operating in Dubai. It's a two part strategy to reach companies in the Middle East and to mitigate the rising cost of oil. You can operate an intercontinental hub for both Asia and Europe. Dubai is a hot area at the moment."
      Price says logistics providers could benefit greatly if Europe would adopt a central air traffic control system rather than continuing the current practice of each country operating its own system.
      "Because each country has its own air traffic control, we burn about 15 percent more fuel than needed as opposed to a central system," Price says. "In addition to added costs, there is an environmental aspect as well. It's more of a regulatory issue than an investment in infrastructure."
      Another issue recognized by both logistics providers and by most European transportation ministers, Price says, is that there is a greater need for access to rail for cargo shipments.
      "The ability of the logistics industry to get access to rail in a consistent way is very hard. For me to be able to get a guaranteed 100 rail cars for six nights a week for a year, well, I have a better chance of winning the largest lottery in history. There is a huge challenge to extending rail lines. Deutsche Bahn did extend a rail line from Leipzig to Frankfurt, and we see that as a great signal there is an awareness of the issue."       Increasing environmental interest is another trend.
      "We get a lot of customers who ask about our environmental policy," Price says. "Environmental questions come up far more regularly than even just a year ago."
      Environmental concerns, especially the need to reduce CO² emissions, are also driving major infrastructure projects. In Northern France, such a project will soon leave the drawing board for the construction phase. The €4-billion (US$6.3-billion) Seine Nord Europe project, which will link the hinterlands of France, Belgium and The Netherlands to major seaports through a series of canals, will help create a high-capacity navigable network across northern Europe. It is the French section of the larger European Seine-Scheldt waterway project, which includes canal expansions in Belgium.
      "The Seine-Nord Europe project will exert a strong positive impact on the economic growth of the regions and territories connected to the project, in particular by offering new logistical solutions and improving the connections between the largest European seaports from Le Havre to Rotterdam, through which more than 60 percent of all commercial traffic between the EU and the rest of the world is transiting," says Nicolas Bour, head of the Seine-Nord Europe project.
      Bour says four integrated multi-modal platforms planned for Nesle, Cambrai-Marquion, Perrone-Haute Picardie and the Noyon region will provide new sources for economic growth. He says these sites will not only offer regular river shuttles to maritime ports and rail shuttles, but will also be prime locations for construction of industrial or logistic sites. Construction of the 106-km. (66-mile) Seine Nord canal is due to begin in 2011 with completion in 2015.
      "The Seine-Nord Europe Canal is going to provide businesses with new logistics solutions based on the inherent qualities of waterway transport, which are reliability and safety." Bour says. "On top of that is the important additional advantage of the wide gauge: price competitiveness."
      The Seine-Scheldt project will be the first large European inland waterway to be completed under the Trans-European Transport Network (TEN-T) program.
      Bour says estimates indicate that Seine-Nord Europe, the French section of the Seine-Scheldt project, could allow the transfer of almost 5 billion tons/km (8 billion tons/mile) from roads to waterways – the equivalent of 25 percent of the European Commission's annual target for the Marco Polo program, which seeks to shift freight transport from the road to sea, rail and inland waterways. The European Commission forecasts that the growth of waterway traffic could remove up to 500,000 trucks from European roads by 2020, and up to 1.2 million by 2050. As a result, greenhouse gas emissions could be cut by 220,000 to 280,000 tons of CO² by 2020, and by 570,000 tons by 2050.
      The Northern France port city of Calais is home to another major infrastructure project, the Eurotunnel, the world's largest undersea tunnel connecting Great Britain to continental Europe. More than 1.4 million trucks and 2,800 freight trains traveled through the 32-mile (52-km.) tunnel in 2007. Freight train traffic has been decreasing in favor of trucks, but Eurotunnel officials are hoping environmental concerns will push companies to consider greater use of rail freight.
      The Eurotunnel made its first profit in 2007, albeit a relatively meager €1 million (US$1.57 million). But that comes after many years of financial strife for the infrastructure icon, which opened in 1994.
      "We expect our profits to grow in the coming years," says Jean-Pierre Trotignon, Eurotunnel's COO.
      Another major infrastructure project will be developing over the next several years at the Port of Calais, France's fourth largest seaport behind Marseille, Le Havre and Dunkirk. A €500-million (US$785.4-million) project will enlarge the port by 2015 and allow it to accommodate larger container ships.
      Infrastructure and location are pushing logistics development in the Nord-Pas de Calais region of France. Michelin chose the Valenciennes area for its 646,000-sq.-ft. (60,000-sq.-m.) distribution center, which is operated by the logistics firm Norbert Dentressangle. The facility receives tires manufactured in Ireland and Scotland and distributes them throughout northern Europe.