What is the outlook?
Sebastian Śliwieński: In your opinion, what is the outlook for the Polish warehouse market in the coming months? Preliminary forecasts for Poland and Central and Eastern Europe suggest that the boom that has been ongoing for several years may be slowed down in 2009. Is the specter of recession beginning to loom over Polish companies? Or is this just pessimism and there is nothing to worry about? What does the situation look like through the prism of your companies’ operations?
Ewa Radomska-Deutsch: In my assessment of the situation, market trends may be more optimistic than they appeared two years ago when I participated in a panel on whether Poland could become the logistics hub of Europe. Various analyses confirm that the situation in the warehouse market will continue to develop well in the coming years, and modern space will systematically increase. I look at the situation through the prism of space already leased and space that tenants are waiting for, and I conclude that the situation is developing well.
Przemysław Uklejewski: I will answer this way – as Nissan Forklift, we decided to showcase warehouse technology at the Taropak 2008 trade fair in Poznań. Until now, Nissan did not have warehouse trucks in its offer in Poland. This is therefore a well-thought-out step that aligns with the market situation. I will add that this is not an action plan outlined for the next few months, but rather, as presented by Nissan representatives during this year’s CeMAT trade fair in Hanover, it is a multi-year plan. Regarding market forecasts for Central and Eastern Europe, I allow myself to look to the future with optimism.
Sebastian Śliwieński: Optimism prevails, and perhaps that is good, but let’s look at the matter from a slightly different perspective. In recent years, market results have spoiled the logistics industry. Profits at the level of several dozen percent per year have become the norm. For many companies, in the event of an economic slowdown, the need to lower the dynamics of profit growth from several dozen percent to just over a dozen may be difficult. This can raise nervous questions – is it still good because we are still growing, or is it already bad because the growth is not as high as in the previous year? Numerical data for the first half of the year in the warehouse space market show that results are much better than in 2006, but already worse than last year.
Andrzej Michalski: I will briefly refer to the perspective of our country’s development in the logistics market, taking into account European or even pan-European logistics. What was a problem for Poland in terms of our exceptionally complicated history, namely our geographical location between Russia and Germany, now creates a huge opportunity for the development of companies in the TSL industry. The outlook is therefore very optimistic, but in the long term, i.e., over the next several to a dozen years. Our economy is not a lonely island. The financial crisis in global markets, which also includes Europe, is clearly slowing down development in the eurozone, negatively affecting the economic situation in Poland as well. Therefore, in my opinion, the short-term outlook for the market, I mean a year, two, or even three years, is not that optimistic. The profits of companies that grew by even several dozen percent per year may melt down to a dozen or perhaps even a few percent, depending on the industry. However, I am convinced that this is only a transitional state and over time we will return to a dynamic growth trend.
Sebastian Śliwieński: Director, perhaps a specific example. What does it look like from the perspective of Mecalux?
Andrzej Michalski: Indeed, Mecalux is an interesting example of how dynamically one can develop in the Polish market. Our turnover growth in 2007 compared to 2006 was over 100 percent. However, as I mentioned, there are unfortunately some symptoms of an economic slowdown, so assuming the same level of growth for this year as last year is rather unrealistic. We must therefore, keeping hard data in mind, prepare for slightly worse times. Of course, I do not assume a situation where companies in our industry will suddenly start going bankrupt en masse, because logistics in Poland is developing dynamically and will continue to develop at a fast pace for many years to come.
Adam Wojciechowski: Supplementing Director Michalski’s statement – technical infrastructure is not a commodity that sells like hotcakes. One must be aware that one warehouse modernization (and in the current phase of market development, we are mainly dealing with such solutions) does not entail subsequent ones that will follow in a short period of time. Poland, as a member of the EU, has a chance to expand its technical infrastructure using funds to support innovative solutions. We can make a very large qualitative leap by using the latest technical solutions.
EU funds as an opportunity to maintain the level of development
Artur Olejniczak: The warehouse boom is noticeable. This is evidenced by data and reports prepared by the Institute of Logistics and Warehousing. We see that companies are constantly looking for new solutions to operate in a highly competitive market.
Andrzej Michalski: Speaking of long-term and short-term perspectives, I do not intend to be a doomsayer. I only claim that the best times are temporarily behind us. In about two or three years, the dynamic growth trend should return. Unless, as Mr. Wojciechowski mentioned, we skillfully use European funds for innovation, which will allow us to maintain growth in terms of value. Fortunately, companies are beginning to treat logistics more seriously as a source of concrete savings. Business owners understand that efficient logistics is something that will help them survive difficult times associated with a possible economic downturn.
Przemek Uklejewski: I am listening carefully to what Mr. Wojciechowski said about EU funds. However, I will ask on this occasion – to what extent is the client educated in the scope of using these funds. The Polagra fair, taking place in parallel with Taropak, shows that companies from that industry are perfectly capable of managing in this area, for example by using the Rural Development Program. I therefore ask, at what level is education and access to knowledge about EU funds and innovations? I am thinking not only about the level of so-called large logistics but also smaller companies that do not have such large capital backing and are constantly looking for modern solutions to cope in a competitive market.
Adam Wojciechowski: The knowledge of logistics market participants is constantly growing and is being developed in various ways. One of the sources is the Poznań Institute of Logistics and Warehousing. In addition to preparing projects for companies on its own, this institution widely propagates knowledge. However, I will add that knowledge alone is not everything, because EU funds must be available to all market users. Large players, linked to the market of developed European countries, naturally have it easier because they have a worked-out model for absorbing EU funds. However, the Polish market is saturated with small and medium-sized enterprises, and these entrepreneurs need help the most. One of the interesting new solutions that can help will be the system of innovation vouchers, which will allow SMEs to benefit from funding for infrastructure development.
Artur Olejniczak: I will only add that as far as education is concerned, the Polish ministry and government stated some time ago that the Polish labor market does not need logistics masters or engineers, but people who are to work at the middle management level in TSL companies. That is why three years ago, two specialties were launched in secondary schools: logistics technician and freight forwarder technician, and already this year one can observe the influx of these graduates into the market.
Company proposal for the SME sector
Artur Olejniczak: Referring to the previous answers – are your services and products mainly of interest to the biggest players, or are representatives of the SME sector actually reaching for them?
Ewa Radomska-Deutsch: Not only large corporations, but quite a few smaller companies are interested in renting warehouse space. This affects market trends. Large developers have already partially saturated the market and found corporate tenants and have come to the conclusion that today one needs to build warehouses that will have smaller modules. Hence, more and more modules of about 500 square meters plus office space are appearing on the market, because that is the demand. Therefore, more and more companies from the SME sector can afford to rent space in good locations, in a high standard, and at the same time without the need to buy more square footage than the company’s actual needs.
Andrzej Michalski: The share of clients with different potential is still dependent on the specifics of our market. I will give an example. For comparison – in Spain, Mecalux alone has built about two hundred automated warehouses in a dozen or so years; in Poland, a total of about a dozen have been built. The industry of automated systems is only just beginning to develop here; we have increasingly higher land prices, salaries are rising, and over time many companies, under certain operating conditions – e.g., factory work in three shifts, high rotation of load units – will decide to build modern automated warehouses. They will come to the conclusion, as is happening in Western Europe, that such a solution brings measurable savings over time. Suffice it to mention the example of automated cold stores. In Poland, most likely only one fully automated warehouse of this type has been implemented. In Spain, Mecalux alone has built about 20 such facilities. The application of modern logistics in the manufacturing industry will become more and more common, because the field for action is huge. Both for large companies and, over time, for small or medium-sized ones, for whom innovative technologies are very important.
Adam Wojciechowski: More and more companies from the SME sector are turning to our institute for help in developing their logistics infrastructure. Of course, one must be aware that logistics is not only warehouses but also transport. Many small companies with a potential of several vehicles must develop, or consolidation of these companies should occur so that the prices they offer to clients are competitive. I therefore see a large role for scientific institutions, which can very concretely help in the development of the TSL industry.
Przemek Uklejewski: I will return to what Mr. Andrzej Michalski said. In the refrigeration industry, there are no fully automated warehouses. A large part of the warehouses that operate on the market today were built back in the 80s, and interestingly, there is no sign of development in this segment. Therefore, I see an important role here for the largest companies – educating, popularizing knowledge about innovations and development opportunities. I therefore conclude that the market should be examined more deeply today. Translating this to our ground – perhaps it is not enough today to be merely a distributor of forklifts, perhaps it is not enough to implement good marketing campaigns. Perhaps today one needs to reach for new solutions, that is, to jointly look for solutions – what type of warehouse should it be, look for support for innovation subsidized by the European Union. If it is the case that these smaller market players are becoming even more important, then perhaps one should focus more on after-sales activities, and not on sales in the strict sense? This is a question worth answering.
Opportunities and threats
Sebastian Śliwieński, Artur Olejniczak: What would you wish the industry for 2009, what opportunities are worth seizing? And on the other hand – What problems, in your opinion, should be solved first?
Andrzej Michalski: Poland has a chance to become not only the granary of Europe but, above all, the main communication hub of the Old Continent. Therefore, by far the biggest challenge for our country, when it comes to broadly understood logistics, is the fastest possible development of road and rail infrastructure. Unfortunately, there are still many companies that do not invest in Poland or do so to a limited extent because they fear potential additional costs and problems with access and distribution. We cannot focus only on building logistics and warehouse centers in the same places, along short sections of the A-2 and A-4 motorways, around Warsaw, in Stryków… We must focus on building new roads and motorways – this is our opportunity, but also the biggest challenge.
Ewa Radomska-Deutsch: Emphasis should be placed on cooperation and collaboration within one industry. On this occasion, I would like to draw attention to what we can do together and invite you to present products and offers on a new portal owned by the National Warehouse Consortium.
Adam Wojciechowski: Fortunately, we have Euro 2012 up our sleeve, and this will certainly mobilize the market and have a positive impact on infrastructure expansion. This is an opportunity. However, what needs to be solved as quickly as possible is the problem of pallets, which many companies are struggling with.
Przemek Uklejewski: We have already talked a bit about threats, so I will talk about opportunities. Nissan has introduced lithium-ion batteries to the market. Near Tokyo, forklifts with lithium-ion batteries are working in warehouses. This is an example of an action that shows how important continuous innovation is. Therefore, I would wish myself and the industry a deep breakthrough in the coming year. A novelty is needed by the entire Polish economy, and the logistics industry, as one of the most innovative fields, can point the direction of action.
Participants:
Ewa Radomska-Deutsch, National Warehouse Consortium;
Andrzej Michalski, Sales Director for Automated Systems, Mecalux SA; Przemek Uklejewski, Marketing Manager, Nissan Forklift,
Adam Wojciechowski, Institute of Logistics and Warehousing in Poznań.
Moderators:
Artur Olejniczak, Editorial Secretary of the “Logistyka” magazine,
Sebastian Śliwieński, Editor-in-Chief of “Nowoczesny Magazyn”, “Logistyka a Jakość”, “Transport i Spedycja”.