The future looks bright for Germany. Its economy is relatively strong, exports are up, and some of the businesses that shifted their manufacturing to China over the past decade appear to be coming home. But it's not all beer and sauerkraut for the European Union's "economic engine." Germany is grappling with a number of supply-chain challenges - the very ones that are bedeviling North American companies.

Start with people. We've heard about the huge European labor pool from which German manufacturers could draw, thanks to high unemployment rates in Spain, Portugal, Ireland and elsewhere in Europe. That's one reason why the relocation of manufacturing capacity back to the continent from China seems like an attractive idea. But when it comes to skilled management positions, Germany is facing the same dilemma that's emerging in the U.S. An entire generation of workers is nearing retirement, and there simply aren't enough trained bodies to take its place.

Heading up a panel at the recent Transport Logistic show in Munich, Jorg Mosolf, chief executive officer of Horst Mosolf GmbH & Co. KG, said companies can help to narrow the talent gap by promoting better education and training for supply-chain managers. (I suspect that the majority of Europeans are just as clueless about the term "supply chain" as their American counterparts.) The effort needs to extend all the way to drivers, Mosolf said. He also believes that companies can do a better job of integrating women into the supply-chain workforce, in part through the introduction of more flexible working hours. (Whether or not women actually need more flexible hours is another question entirely.)

Yet another European supply-chain issue that will be familiar to Americans is the pressing need to shift more freight from trucks onto rail. Most of Europe's major roadways, especially around the big cities, are horribly overcrowded. Rail offers one solution to the congestion, as well as a much more economical means of moving goods over long distances. According to the EU, Europe's rail freight traffic will likely double in volume over the next 15 years.

The problem for Europe is that its rail systems were designed to favor passenger traffic over freight, the opposite of the way things work in the U.S. In addition, low tunnels, bridges and other urban impediments make it difficult or impossible to clear many routes for cost-efficient double-stack trains. Even single-tier unit trains would have a hard time competing for rights of way with the continent's frequent and omnipresent passenger services. The American vision of a dedicated, mile-long train crossing the country unimpeded just won't work for much of Europe. Christian Kille, head of business with Fraunhofer SCS, a supply-chain research center, called the rail system "the next bottleneck" in Germany's freight transportation network.

Nevertheless, European planners are determined to put more goods on the rails. Which raises the problem of how to pay for new transportation infrastructure. Here again is an issue that appears to be plaguing much of the industrialized world. The Great Recession dealt a huge blow to government coffers, and still-fragile economies are struggling to come up with the money to repair existing roads, bridges and rails, let alone pay for new projects. Mosolf said 550bn euros (around $775bn) is needed to pay for basic infrastructure improvements, but where that money is supposed to come from is anyone's guess. Karl-Friedrich Rausch, member of the management board with DB Mobility Logistics AG, warned that the failure to improve Germany's transportation network, particularly rail, will lead to serious bottlenecks throughout the system. As if that weren't already a problem.

Similar challenges exist on the port side. Like it or not, the latest generation of massive containerships, with capacity of up to 18,000 twenty-foot equivalent units, are on the way. Most European ports - most ports in the world, for that matter - have neither the depth of water nor the berths and cranes to handle them. Meaning that even big gateways like Hamburg might get passed by. "German ports don't need to be afraid of 18,000-TEU ships," said Kille. What they ought to fear is the consequences of not preparing for the huge influx of containers that will result from just one of those monsters tying up at their berths. Everything from container yard space to rail and road access will be affected. Heinrich Kerstgens, chief executive officer of logistics service provider Contargo GmbH & Co. KG, said the region is likely to see a doubling of the volume of cargo moving by sea in the coming years. Failure to make key improvements now -  including an expansion of Germany's system of inland waterways - could leave the country high and dry, in its ability to compete with other nations.

Where there's money, there are banks - or so you might assume. In truth, the failure of Germany's banking system to support business during the crisis has hampered companies' ability to recover fully from the recession, said Detthold Aden, president and chief executive officer of BLG Logistics Group AG. Mid-sized businesses have suffered the most, denied access to crucial funding mechanisms such as credit insurance. Only now are credit flows beginning to loosen up - slowly. Sound familiar?

Finally, there are environmental concerns to be addressed. One could argue that Germany and other European countries have been thinking "green" for a lot longer than the U.S. Certainly the European Union bureaucracy has lumbered into action, with such directives as Restriction of Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE).

On the logistics end, providers are faced with the soaring cost of fuel, the environmental impact of their operations and the pressing need to find new and cheaper sources of energy. Thorsten Blecker, professor at the Technical University of Hamburg-Harburg, said companies need to track the massive amounts of carbon dioxide, sulfur dioxide and nitrogen dioxide that spew from ships and other modes of transport. He cited predictions from the ship-classification society Germanischer Lloyd that international shipping will generate a 42-percent increase in SO2, and a two-thirds rise in NO2, by 2020. With the price of oil expected to climb as supplies become more scarce, it becomes essential to develop other means of propulsion. Yet no viable alternative is on the horizon.

So American logistics managers should feel right at home in Germany. And there's one more point of commonality: the unpredictability that's built into all global supply chains. Whether it's a tsunami, nuclear disaster, currency crisis or port strike, companies need to be drawing up Plans A, B and C to keep their products moving to market. The guiding principle was summed up by Mosolf: "That every day, something is going to happen. We just don't know what."

- Robert J. Bowman, SupplyChainBrain

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