Optimal Logistic Networks as a prerequisite for sustainable SMEs’ development in the Baltic Sea Region, Anatoli Beifert / Gunnar Prause, 9th International Entrepreneurship Forum (9th IEF), 16-18 September 2009, Sabanci University Istanbul
Optimal Logistic Networks as a prerequisite for sustainable SMEs’ development in the Baltic Sea Region Anatoli Beifert Wismar University, Germany
[email protected]
Gunnar Prause Wismar University, Germany
[email protected]
Logistics has been one of the most booming sectors in the Baltic Sea Region till begin of the financial crisis. The reason was based on the exploding trade volumes inside the Baltic Sea Region after the EU enlargement in 2004 so the expectations for the time after the financial crisis are still enthusiastic. This paper will concentrate on the situation in the Southern Baltic Sea Region (SBSR) with a focus on the ongoing logistics - related innovation projects in the North-Eastern part of Germany, South Sweden und Lithuania. The SBSR business structures are mainly dominated by SME so consequently, the majority of oriented logistics activities are realised nationally and translationally by networks of SME. From former studies it is well known that especially the international business and R&D – sector are representing a real challenge for SME, due to their limited resources and their lack of international experience. Wismar University took part in several national and European projects with focus on European SME structures around the Baltic Sea Region. Two important logistics related EU projects were LogOn Baltic and InterBaltic whereas the Baltic Business Development Network project and the EU project “International comparative studies and course development on SME” were more concentrating on internationalisation of SME. In a couple of ongoing logistics projects like the German national research project “Innovation Network: Logistics Cluster Wismar” and the Southern Baltic Sea INTERREGIVA – project “Oversize Baltic” as well as the INTERREGIVB – initiative “East West Transport Corridor II” give an insight view of SME in logistic innovation networks including also aspects of internationalisation. Within all indicated projects Wismar University has been participating in a variety of empiric activities in order to reveal success factors for innovation, internationalisation, and logistics – related entrepreneurship. By means of questionnaires, expert interviews, case studies, and secondary research results this paper is aiming to reflect the main outcome of empirical activities executed in the
mentioned projects for the Southern Baltic Sea Region applied to the SME sector in existing logistic service networks.
I.
Mecklenburg – Vorpommern as a part of Eastern Germany Mecklenburg-Vorpommern, located between two of the largest cities in central Europe,
Hamburg and Berlin, is Germany’s gateway to the Baltic North and North East with a growing importance as a hub for traffic to and from Scandinavia, Eastern Europe, and overseas. The region is connected to a number of important ports in the Baltic Sea Region (BSR) through several ferry and shipping lines. The improved and expanded traffic network as well as the modern seaports and airports offer efficient transportation links to the German and European hinterland. Modern shipyards and their suppliers, as well as port-related and maritime industries are some sectors dominating the regional economy. Following figures illustrate the regional locations of interest in the logistical sector:
Company
Employees
Services
Seaport Wismar
170
Cargo handling, storage
Seaport Rostock
250
Cargo handling, storage
Seaport Sassnitz
40
Cargo handling, storage
AIDA Cruises
2.400
Cruise line company
DE Seereederei
2.600
Shipping company
Laeisz
1.100
Shipping company
Scandlines
2.800
Ferry company
LIDL Logistics
250
Logistics Centre
Noris Zahn Logistics
130
Pharma Logistics
Due to the increasing importance of logistics for the whole region of MecklenburgVorpommern, in 2007 the regional government founded a logistics initiative with the intention to develop and strengthen the regional logistical activities. Wismar University is a member in this logistics initiative and took actively part in the two logistics – oriented EU projects “LogOn Baltic” and “InterBaltic”– within the framework of the INTERREG III B programme. In three ongoing logistics projects i.e. the German national research project “Innovation Network: Logistics Cluster Wismar” and the Southern Baltic Sea INTERREGIVA – project “Oversize Baltic” as well as the INTERREGIVB – initiative “East West Transport Corridor II” give an insight view of SME in logistic innovation networks including also aspects of internationalisation. Within all indicated projects Wismar University has been participating in a variety of empiric activities in order to reveal success factors for innovation, internationalisation, and logistics – related entrepreneurship.
II.
Rostock Seaport Cluster
Rostock seaport has been historically the kernel of a maritime cluster with a big number of enterprises and employees working mainly in the environment of logistics. After the German reunification in 1990, this seaport cluster was restructured where the development can be regarded in the following figures:
Companies Employees
1989
1994
1998
2005
30 10.500
217 7261
168 4443
181 5472
The structure of the companies in the seaport cluster changed from a smaller number of large enterprises during the GDR time to a bigger number of smaller companies in recent days. This is expressed by the average number of employees per company which dropped from approximately 350 in 1989 to approximately 30 in 2005. A number of analyses about the structure of companies and employees have been made by Rostock University and Wismar University and some important results of an actual analysis can be found in [BP2].
The number of possible factors influencing the performance of clusters is immense. Furthermore, the performance of companies inside a cluster can only be understood when their embeddedness is taken into account. The most complete measure for the performance of clusters is the value added generated in the cluster. The value added generated in the cluster is the sum of the value added generated by the members of the population.
One important approach for measuring the performance of clusters was developed by Peter De Langen in his PhD thesis [DL] based on the consideration of a set of 8 variables influencing the performance of a seaport cluster where 4 are focusing on the cluster structure and the other 4 are describing cluster governance: I.
Cluster structure
Element of cluster structure
Effect on cluster performance
Agglomeration economies
• • • • • • •
Internal competition
A shared labour pool attracts firms to the cluster. The presence of customers and suppliers attracts firms to the cluster. The presence of knowledge (spill-over) attracts firms to the cluster. Land scarcity and high land prices ‘disperse’ firms from the cluster. Congestion disperses firms from the cluster. Internal competition prevents monopoly pricing. Internal competition leads to specialization.
Cluster barriers
• • •
Cluster heterogeneity
II.
• • •
Internal competition promotes innovation. Entry barriers (such as inaccessible networks) and start-up barriers (such as nonavailability of local venture capital) reduce competitive pressure and prevent the inflow of (human) capital. Exit barriers (such as ‘sticky labour’ and cluster specific investments) reduce uncertainty for firms in the cluster. Cluster heterogeneity enhances opportunities for innovation. Cluster heterogeneity enhances opportunities for cooperation. Cluster heterogeneity reduces vulnerability for external shocks.
Cluster governance
Elements of cluster governance
Effects on cluster performance
The presence of Trust
• •
The presence of intermediaries
•
The presence of leader firms
• •
Quality of collective action regimes
•
Trust lowers coordination costs because costs to specify contracts decrease. Trust increases the scope of coordination beyond price, because the risk of free riding decreases. Intermediaries lower coordination costs and increase the scope of coordination beyond price because they specialize in managing coordination. Leader firms generate positive external effects for firms in their network, mainly by encouraging innovation and promoting internationalization. Leader firms generate positive external effects for firms in the cluster, mainly by organizing investments in the training and education infrastructure, the innovation infrastructure and the infrastructure for collective action. The more resources are invested in collective action regimes, the better the performance of a cluster. Five variables influence the amount of invested resources: o role of leader firms, o role of public organizations, o presence of an infrastructure for collective action, the presence of a community argument o use of voice.
The approach of De Langen was the starting point for a deeper analysis of the seaport cluster of Rostock which was executed within a regional study of Wismar University [PR].
III.
The Performance of the Rostock Seaport Cluster
During 2006 and 2007 a couple of empiric activities have been executed in the frame of the two INTERREG III B projects “LogOn Baltic” and “InterBaltic”. Another study deals with the assessment of the performance of the Rostock seaport cluster according to the methodology of De Langen. The main results of this study will be presented here together with other results related to the two EU-projects where the main focus is laid on the SME as a part of the seaport cluster. A closer view at the companies integrated in the Rostock seaport cluster reveals that nearly all of them belong to the logistics-related sector, outlining that the seaport cluster can be considered as a service cluster.
In accordance with the analytical framework of De Langen, an analysis of the 8 structural variables of the Rostock seaport cluster was realised. Since the structural variables are ordered in 2 categories “cluster structure” and “cluster governance”, first the strengths and weaknesses related to the cluster structure and hereupon strengths and weaknesses related to the cluster governance will be presented:
I.
Cluster structure a. Strength of Rostock Seaport Cluster 1. Strong potential of working power 2. High transportation volume 3. Low rent and real estate prices b. Weakness of Rostock Seaport Cluster 1. Low variety of goods 2. Low variety in cluster population 3. Low presence of customers and suppliers
A surprising observation of the results of the study was that knowledge spill-over effects inside the cluster have been regarded as relatively unimportant showing together with the weaknesses in the variety of goods and in the cluster population a strategic disadvantage in the area of innovations of the cluster. The high ranking of the available working power, high transportation volumes and low land prices are revealing an emphasis on operating topics in the perception of the cluster companies.
II.
Cluster governance a.
Strength of Rostock Seaport Cluster 1. Presence of intermediaries 2. High quality in common problem solving
b. Weakness of Rostock Seaport Cluster 1. Low trust among cluster companies 2. Existence of central actors The stated strengths in the Rostock Seaport Cluster are focusing on the freight forwarders and brokers who are generating and distributing service tasks among the cluster companies. These intermediaries are competent and there is a high quality in problem solving inside the cluster. However, these mentioned strengths are emphasising more the operational level of
business activities. When it comes to the weaknesses inside the cluster, the existing low level of trust reveal a strategic problem for the future cluster development. Concerning the issue of trust, it was assessed that the actual level of trust inside the cluster was very low and additionally, the importance of trust for the cluster development was regarded as low. This weak perception of trust as an important cluster dimension is also expressed in the second weak point concerning the existence of central actors. In general, central actors like the port administration, are taking over the role of moderators between different cluster companies and laying the ground for the common cluster activities and as such, they are fostering trust among the cluster population. So due to the absence of strong central actors inside the seaport cluster the soft dimensions are underdeveloped indicating a strategic weakness of the whole cluster and representing an important threat for the future cluster development.
IV.
Innovation Network: Logistics Cluster Wismar
The national research project „Innovation Network: Logistics Region Wismar“ was initiated in Summer 2008 by the Federal Ministry for Transport, Construction and Urban Development. Under the lead of Rostock University and Wismar University the research project is aiming to promote and develop an integrative of maritime logistics network around the Wismar seaport by focussing on the following targets: •
Profiling of the logistics region Wismar
•
Implementation of an innovation network
•
Improving the networking activities around Wismar and linking them to the BSR
The target groups of this project are mainly logistics service providers and freight forwarders around Wismar with a focus on maritime logistics. The project will continue till September 2010. After couple of expert interviews focussing on logistics and ICT topics, the project was able to present the first results. By asking the logistics experts about the main obstacles for a stronger integration and better development of the regional logistics network the following answers were given:
Logistics
•
Strong fragmentation inside the logistics network
•
Nearly no ICT – integration
•
Partitioning-off of the logistics executives of larger companies with company
•
Nearly no inter company communication
•
Insufficient cooperation between the companies related to underdeveloped regional
headquarters outside Wismar towards the regional logistics network
networking skills
ICT
•
No common communication platform
•
Lacking data security
•
No need/request of ICT – networking between the partners
•
Different company unique internet portals
•
ICT – networking is no common target ( too expensive, too vulnerable and too heterogeneous )
•
No common strategic concept
•
No real and historical grown cluster structures
•
Orders are still processed traditionally so there are no common ICT – standards
Already the first results of the expert interviews around Wismar Logistics network are revealing significant weaknesses in soft factors and strategic thinking. Both sides of the cluster building process, the economic and the ICT parts are suffering under underdeveloped communication and the will of cooperation. The importance of data security and the strong fragmentation topics inside the potential logistics network are indicating again social trust as a crucial variable in the cluster building process.
V.
Oversize Baltic – South Baltic Area Logistic Initiative
In fact, oversize transportation has a significant influence on regional economic development in every country; however the current situation is that it is organized differently in different countries of South Baltic region. SBR geographically is the coastal region there the oversize transportation is very common because of the activities and the marine industry (production, transportation, energy, etc.) Due to the insufficient harmonization and different national approaches in European Oversize Transportation field, logistic service providers are confronted with a variety of official requirements and procedures, e.g. on vehicle escorts, allowed time frames, authorized speed limits needed for obtaining an oversize road transport permit. All these requirements differ from country to country or sometimes even from region to region. Therefore, often this results in delays and difficulties especially for international transport providers e.g. in making
precise cost calculations or to meet the contractual obligations. The non-standard cargo flow creates also non-standard problems: 1. Different barriers for transportation of oversize goods have a negative impact on the regional economical development and business competitiveness. It starts with complicated issuing of the oversize permits so that it takes a long time to receive them, whereas oversize permits are needed from each country where an oversize cargo goes through. Thus, especially for international shipping it takes longer time resulting in more expenses and expanded development schedules for business. A possible solution is a common standardisation of the oversize requirements and creation of “one stop shop” for permit issue herewith saving time and costs. 2. Unclear possibilities for oversize route planning, i.e. what direction and what optimal routes to take for oversize transportation because oversize cargo require appropriate infrastructure. That lack of adequate infrastructure and planning of corresponding tools lead to insufficient safety of oversize cargo carriers and other drivers that use same roads. 3. Optimized regulation of oversize transport cargo would decrease the amount of trucks, thus reducing the air pollution. 4. High costs and slower development of the industrial projects which requires transportation of large items e.g. power generators, transformers and refinery components. Transportation cots and time schedules could be decreased abolishing all of the obstacles which will be identified. Optimized inter-regional flow of the oversize cargo would have a positive impact on potential for regional industrial development, spatial planning for the industrial production could be optimized, assembling of bigger industrial parts delivered e.g. far from the port or from other regions will be possible and would decrease a price of development and operation of industrial regional development. In order to facilitate efficient transport of bigger goods throughout the European Union, improve safe operations and provide more transparency in the field of oversize
transport, OVERSIZE BALTIC initiative set a core objective as a creation of common Strategy for oversized transport in South Baltic Area and Handbook for oversize transportation technical, legislative and geographical information necessary for permit issue and effective and safe transportation development. A common approach will enable to create stimulating conditions for oversize cargo industry, attracting more cargo flows and increasing the efficiency of the whole South Baltic Region. The general objective of the OVERSIZE BALTIC initiative is to improve quality of oversize cargo transportation services and interoperability of reallocation of large items in the South Baltic area. That is to be done through: 1. Development of a new Oversize transportation strategy increasing regions economical attractiveness; 2. Creation of an SBR oversize transportations information network aiming at improvement of transport operations (“one stop shop” for transportation permits, study and routes); 3. Creation of a regional oversize transportation studies: marking the routs, transportation infrastructure and inter-modality improving oversize transportation affectivity; 4. Transforming the oversize transportation improvement solutions to the regions policy; 5. Improving the business and infrastructure cooperation developing regions competitiveness in global transportation market.
Partners from South Baltic region (Lithuania, Poland, Germany and Sweden) created a partner consortium for solving common problems with purpose to establish an international cluster. The subject of the project is very narrow, and requires specific knowledge; therefore the partner cluster is organized on knowledge and competence basis: 1) technology support organizations established by the governmental institutions and universities, 2) ports, regulated by the state transport authorities, 3) business support institutions, associations, as a direct link to the business. Triple helix model was chosen as a form of such cooperation to strengthen collaboration between business, educational institutions, and public administration. Research institutions from all involved regions will do all the research work and provide recommendations; business companies and their delegates, such as port authorities will use and commercialize
results of studies. National/regional and/or local authorities are willing to be mediators to shift the project results to higher political level and disseminate them to wider audience of potential users.
VI.
East West Transport Corridor II - a green corridor concept within the Northern Transport Axis approach.
Despite recent decrease of trade volumes caused by global financial crises, the east -west trade in Baltic Sea region is expected to continue to increase. The EWTC is considered to be the transport corridor with the fastest developing traffic in the east-west direction having more traffic than in many other corridors in the BSR. E.g. ferry connection between Karlsham and Klaipeda in the corridor carries today all ro-ro traffic between Sweden and Lithuania and the link Sassnitz - Baltijsk has the potential to become an important link between Russia and the core of EU. Increased environmental issues, heavy and growing traffic in the EWTC requires immediate actions to develop efficient and environmental friendly transport solutions to meet the market demands, in particular taking into consideration the low share of inter-modal transport in the EWTC. Moreover, the EWTC has the potential to become an important EastWest trade route between Europe, Russia, Belarus and Far East as testified by fast growing freight volumes in the corridor.
However, the efficiency of the EWTC is handicapped by a number of obstacles e.g. in hard infrastructure and low supply of services, i.e. inter-modal and ITS services. The low quality of the facilities provided by transport hubs, port-hinterland connections and traffic externalities (e.g. rising congestion, air emissions and fatal accidents) are essential problems in the corridor for logistic service providers and for cargo owners. In that respect further development and reduction of bottlenecks in the road and rail networks, new Motorways of the Sea services, business cooperation, new ITS services, capacity building actions and steering mechanisms for more environmental friendly transports are important issues to be addressed for achieving long term sustainable transport solutions.
EWTC complies with many of the transport actions mentioned in the draft Baltic Strategy. The East West Transport Corridor (EWTC) links Minsk,Vilnius, Klaipeda/Kaliningrad with Denmark (Esbjerg) via South Sweden and with Germany via Port of Sassnitz. The transport
corridor includes several TEN-T ports, road and railway links, parts of the Nordic Triangle and Corridor IX B/D in Lithuania/Kaliningrad region. The EWTC is also part of the Northern Transport Axis.
The EWTC II project intends: •
to develop the logistic hubs as growth centres,
•
to strengthen railway concepts,
•
to improve accesses to hubs and increase human capabilities.
The ambition of the EWTC is also to create an innovative testing ground based a “green corridor” concept as described in the EU "Freight Logistics Action Plan" that could serve as a best practise case in the European perspective. Among other things, it includes deployment of advanced ITS services as well as development and testing of an information broker system. The long term goal here is to develop the EWTC to an efficient “green transport corridor” that will be able to meet European policies and market demands for growing freight transport.
The project intends also to apply some decision support tools in analysing options for achieving a green corridor status by forecasting the corridor development in form of a number of scenarios that will be set for the 2030 year perspective. This activity will be coordinated with two other running projects: i.e. TransBaltic and Scandria. The capacity studies, simulations and optimisation of the scenarios would consider the best utilization of the infrastructure and terminals to accommodate the traffic flows. One focus area will be the Öresund Fixed Link due to infrastructure capacity problems. The main findings and results will be visualised.
Structurally, the project consists of 6 Work Packages that are dedicated to various aspects of the green corridor development, resulting in EWTC Green Corridor Action Plan, guidelines, feasibility studies and design plans for concrete infrastructure improvements, variety of business plans and concepts, ICT-based tools and business plans as well as education programmes. In the framework of the project a durable network of stakeholders, so called EWTC Association, will be developed. Furthermore, the project has an intention to unlock some rail and maritime transport investments based on studies and designs envisaged in the project lifetime.
EWTC II plans to secure political support for the process towards the green corridor status and that the whole EWTC should become a part of the TEN-T network extended to Russia (Northern Axis) and Belarus. The EWTC will also strive to be included in the EU strategy/action plan for the Baltic Sea region. The partnership coming from Sweden, Germany, Denmark, Lithuania, and Belarus reflects a cross-sector approach with strong commitment from national, regional and local authorities, ports, universities and private stakeholders. Russian partners from Kaliningrad Oblast are integrated in the project partly funded by some ERDF funds.
The EWTC has gained a political support from the national transport ministries in Sweden, Denmark, Lithuania and Mecklenburg/V and from Euro-region Baltic.
VII.
Bibliography
[DL] P.W. de Langen „The Performens of Seaport Clusters”, TRAIL Thesis Series, no. T2004/1, ISBN 90-5892-056-9 [BP1] Beifert, Anatoli and Prause, Gunnar, "Internationalization Services for SME's - An empric Analysis", Baltic Business Development, Szczecin 2006, pp. 239 - 257 [BP2] Biebig, Peter and Prause, Gunnar, “Logistikentwicklungen in Mecklenburg Entwicklungen und Trends”, Wismarer Diskussionspapiere Heft 07/2007 [PR] Prause, Gunnar, “SME in service cluster – A regional study”, will appear in: Kramer, Jost W.; Prause, Gunnar; Sepp, Jüri (eds.). Baltic Business and Socio-Economic Development 2007 : 3rd International Conference Tallinn, Estonia, June 17-19, 2007 (349−360). Berlin: Berliner Wissenschafts-Verlag.
