Supply Chain Frontiers #40 :: Logistics Parks Moving with the Times

Supply Chain Frontiers issue #40

Logistics parks have become a key component of global distribution networks. As companies look for ways to make their supply chains more agile in order to stay competitive, however, these commercial hubs must respond with flexible service packages and innovative facilities. This is what Europe’s largest logistics park, PLAZA, is doing, as it looks to build on more than a decade of steady growth.

The huge PLAZA logistics complex, located near the city of Zaragoza, Spain, was created by a joint initiative between the regional Government of Aragón and the MIT Center for Transportation & Logistics (MIT CTL), as part of a strategy to transform the region into a logistics hub for Europe.   The government also wanted to stimulate the local economy, a goal that has been met. A study based on 2005 data carried out by Rubén Sainz González, Assistant Research Professor, Transportation, at the Zaragoza Logistics Center, shows that 2.06% of all wages and salaries paid in Aragon, and 1.87% of all the jobs in the region, can be attributed to PLAZA. But González points out that the study underestimates the total economic impact of the logistics park, because the research does not include the impact outside of Aragón and is based on a period when the park was not achieving maximum growth.   The next 10 years in logistics will bring some major challenges for service providers. Networks will undergo continuous change as companies strive to cut costs by keeping inventory levels to a minimum, says PLAZA Director Ricardo García Becerril.   These changes will “make buffer warehouses much more necessary as the distance between centers of production and consumption increases,” says Becerril. He believes that there will be more pressure on companies to choose the right combination of logistics services and node locations to support the centralized inventories they will put in place to keep a lid on costs.   How are facilities such as PLAZA responding? First, by making sure that they maintain the competitive advantages that have underpinned their commercial success up until now. At PLAZA, Becerril says, these advantages fall into three main areas, which, like the sides of a triangle, are interdependent:

• Strategic location. From a supply chain perspective, a logistics park needs to be strategically located. In addition, PLAZA was built in the heart of one of Spain’s economic engines – a region where 70% of the nation’s economy and 22 million people are concentrated.
• Intermodal links. As an inland facility, PLAZA has no choice but to develop excellent access to land and air transportation modes. Its airport can handle 400,000 tons of cargo annually, and an adjacent highway feeds into the national road system. A joint agreement between the regional and national governments enabled the construction of a 100-hectare rail terminal.
• Space to grow. Logistics operations need a great deal of elbow room not only to cope with existing traffic demands, but also to support future growth. “It must be remembered that the (investment) yield on land is not much more than 40%, and recouping the cost of required investments is only possible with a land area of more than 1,000 hectares,” says Becerril.

The land element also presents a new challenge for PLAZA. As a publicly financed entity, it now has to compete with private logistics services providers that are able to take advantage of low prices for infrastructure in an economic down cycle. PLAZA is not able to speculate in this way. “At present, it is very difficult to compete with these facilities on price even though the range and quality of our services and infrastructure are much higher,” Becerril explains. Recent studies of the logistics real estate market indicate that price is more important than service quality or proximity to transportation links, he says.   Still, prices tend to fluctuate with economic performance; a longer-term challenge is the need to keep pace with structural changes in the logistics market. Service providers such as PLAZA have to “pay constant attention to customers that evolve their strategies very quickly, in line with changing demands,” notes Becerril.   The dynamic nature of the market also offers opportunities to capture new business. Customers are always on the lookout for cost-effective service packages that can be adapted quickly to their latest network configuration. PLAZA’s public-private structure enables the logistics park to accommodate these needs. For example, if a customer requires space that is half the size of the available lots, the Government of Aragón – which holds the legal authority – can use an emergency procedure to subdivide the land and expedite the deal.   More broadly, PLAZA is involved in projects to improve communications connectivity for the logistics community. An example is the European Union’s “Motorway of the Sea” project that aims to “introduce new intermodal maritime-based logistics chains in Europe.” The concept is being tested in the transportation corridor that connects the European cities of Lisbon, Madrid, Gijón, Nantes, and Paris. Also under development as part of the project is an electronic transaction platform that connects public entities, such as port authorities, to transportation users.   “A logistics park must always have the right solutions for each individual customer, both in terms of time scale and cost,” says Becerril. This has always been the case, but in today’s fast-paced markets even the right solution has a limited shelf life.   For more information on PLAZA, contact Ricardo García at email: rgarcia@plazalogistica.com, or telephone: +34 976203830.